Summary judgment granted in faulty aircraft engine dispute

On 15 March 2018, judgment was handed down by Cockerill J in the Commercial Court in Aquila v Onur Air [2018] EWHC 519 (Comm).

The case concerned a dispute over the lease of an aircraft engine.

One Essex Court’s David Caplan acted for Aquila, instructed by White & Case.

In summary, Aquila leased the Engine to Onur, but the Engine subsequently failed during a passenger flight, necessitating an emergency landing, and was not used thereafter.

In the proceedings, Aquila sought payment of substantial sums (US$12m+) said to be due to it under the lease, whereas Onur defended and counterclaimed on the basis that (a) the condition of the Engine constituted a breach of contract and warranty, (b) it had been induced to enter into the lease on the basis of reckless (i.e. deceitful) misrepresentations as to the condition of the Engine, and (c) there had been a total failure of consideration.

Those defences and counterclaims were roundly rejected on Aquila’s application for summary judgment. The judgment is of particular interest as an example of the application and power of the doctrine of “contractual estoppel”, whereby parties will be held to a contractual agreement or acknowledgement that X is the case, even if they know that X is not the case.

The lease agreement to which the parties signed up contained extensive “no representation” and “no warranty” clauses, and Onur also signed an “acceptance certificate” prior to taking delivery of the Engine, which stated that Onur had inspected the Engine, that the Engine satisfied the conditions set forth in the lease, and that it (i.e. the acceptance certificate) would constitute conclusive proof of the same. Those were held to be effective in precluding Onur from asserting that the Engine was in a non-compliant condition upon delivery, even notwithstanding Onur’s claim to rescind the lease (and the acceptance certificate) on the basis of misrepresentation. The judgment also contains an important reminder as to the need for clarity and full particulars when it comes to pleading a case in fraud.