CREDIT SUISSE AG V ARABIAN AIRCRAFT & EQUIPMENT LEASING CO EC AND OTHERS

[2013] EWCA Civ 1169, Court of Appeal, Lord Justice Mummery, Lord Justice Lloyd and Lord Justice Moore-Bick, 2 October 2013

Aviation - Aircraft - Leasing agreements

At first instance the judge ordered the defendant, AA, to pay into court the sum of US$2,563,000 as a condition of defending the claim brought against them by a bank, Credit Suisse AG. The bank had agreed to lease a Canadair Challenger aircraft to AA with a view to its being sub-leased to, and operated by, Bexair. AA had previously entered into an agreement with a Canadian company, Bombardier Aerospace Corporation, to buy the aircraft for the sum of US$13,055,000, but had subsequently obtained financing from the bank, which took an assignment of the benefit of the purchase contract in order to enable it to lease the aircraft to AA. The lease was guaranteed by Mr Mansour, a shareholder in and a director of both AA and Bexair, and was supported by an assignment by Bexair of the benefit of insurances and other agreements which it had entered into as operator of the aircraft. The assignment included a covenant on the part of Bexair to discharge the obligations of AA under the lease. The initial term of the lease was eight years from the delivery of the aircraft. The aircraft was delivered in March 2004. For some time AA made monthly payments under the lease in accordance with its terms, but in early 2009 it encountered financial difficulties and failed to make the payments due in April, May and June that year. By clause 18.1(A) of the lease the failure to make payments promptly when due constituted an event of default, the consequences of which were set out in the following parts of clause 18. Defendants appealed the judge's decision.