S.C. Compania Nationala De Transporturi Aeriene Romane Tarom S.A. v Jet2.Com Ltd [2014] EWCA Civ 87

Case No A3/2013/2883/2885[2014] EWCA Civ 87
IN THE COURT OF APPEAL (CIVIL DIVISION)
[2012] EWHC 622 (QB)[2012] EWHC 2752 (QB)
ON APPEAL FROM
THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION
COMMERCIAL COURT
HHJ Mackie QC (Sitting as a Judge of the High Court)
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 6 th February 2014
Before
THE MASTER OF THE ROLLSLORD JUSTICE BRIGGSLORD JUSTICE CHRISTOPHER CLARKE
Between
S.C. Compania Nationala de Transporturi Aeriene Romane Tarom S.A.AppellantJet2.com LimitedRespondent
(Transcript of the Handed Down Judgment ofWordWave International LimitedA Merrill Communications Company165 Fleet Street, London EC4A 2DYTel No: 020 7404 1400, Fax No: 020 7831 8838Official Shorthand Writers to the Court)
Michael McLaren QC and Bajul Shah (instructed by Clyde & Co) for AppellantAlan Steinfeld QC and Steven Thompson (instructed by Bird & Bird LLP) for RespondentHearing Hearing date: 9 th December 2013
Judgment
[1]SC Compania Nationala de Transporturi Aeriene Romane Tarom S.A (“Tarom”) appeals against a judgment of HHJ Mackie QC of 11 October 2012 (following an earlier judgment of 15 March 2012) by which he gave judgment in favour of Jet2.com Ltd (“Jet2”) for damages for breach of contract. The essential issue is as to the assumptions, if any, that ought to be made for the purposes of assessing Jet2’s damages in respect of Tarom's repudiation of the relevant contract. The background[2]Jet2 runs a low cost airline based in Leeds. Its fleet included some 20 B 737 aircraft. These required extensive checks, known as C-Checks (of which there is more than one type), on average once in every two years. For that purpose the aircraft has to be taken out of service and moved to a hangar where the service takes place. Jet2 is a leisure airline and it is, therefore, important to it that C-Checks should be carried out, if possible, during the period from September to Easter (“winter” for these purposes), when not all aircraft will need to be in service. Tarom is the Romanian State Airline based in Bucharest, where it had in 2004 the facilities and personnel needed to provide the services required by Jet2. The contract[3]On 26 July 2004 Dart Group plc, Jet2’s parent company, entered into an aircraft maintenance agreement (“the Agreement”) with Tarom by which Tarom agreed to provide base maintenance services to B 737 aircraft until 26 July 2007. On 6 January 2005 the Agreement was novated from Dart Group plc to Jet2.[4]In 2004 Tarom gave a presentation to Jet2 in which it anticipated that it would be able to carry out about 16 checks per year on the B 737 fleet. When the Agreement was made Tarom had a highly skilled workforce which it was able to hire out at what were, in international terms, very competitive rates. The relevant terms

The judge summarised the relevant articles of the Agreement as follows:

[5]“8. Article 1 deals with interpretation setting out a considerable number of defined terms the most relevant of which are; ""Aircraft" / "Aircraft Fleet"– in essence, any Boeing 737 operated by Jet2, in respect of which Tarom might be asked to perform Work pursuant to an RFS. "RFS"– a Request for Service, defined by the example appended to the Agreement. "Term"– 3 years, but extendable under Article 16, which gave Jet2 a unilateral option to extend for a further 3 years on the same terms unless the parties agreed variations before the end of the first 3 years; "Work" – services requested by Jet2 under an RFS or otherwise carried out under the Agreement. In practice this was base maintenance work, known as or carried out during the course of C-Checks; "Work Commencement Slots" – called by the parties "slots" or "WCSs", but defined as dates set out in Appendix F and in respect of which an RFS is delivered. "Working Day" included Saturday mornings and excluded any day which was a public holiday in Bucharest. 9 Article 2 deals with the scope of services. The Agreement is to apply "in relation to each such Aircraft as the Customer may from time to time at its election specify is an Aircraft to which this Agreement is to apply, in relation to the Work specified in an RFS relating to such Aircraft issued by the Customer to the Contractor. Any RFS issued by the Customer must be delivered to the Contractor not later than 60 days prior to the Work Commencement Date for that Aircraft specified in the RFS". 10 By Article 2.4 the Contractor holds open Work Commencement Slots exclusively for the use of the Customer. The Customer will however lose its rights in relation to a slot if it has not by a specified due date elected to issue an RFS for Work to be commenced on an Aircraft on the date of that Work Commencement Slot. Article 2.4 also requires the customer by no later than 1 June in each year to pay to the contractor US$10,000 for each of the Work Commencement Slots available to the Customer during the twelve months commencing on the next following 31 August for a Check other than a 6C-Check and US$20,000 for each of the Work Commencement Slots available to the Customer during twelve months commencing on the next following 31 August for a 6C-Check. 11 Article 3 deals with charges and payment requiring all sums due to be paid in US dollars and for 50% of the agreed fixed price for an RFS, less any deposits paid, to be paid on or prior to the delivery of the Aircraft for its checks. 12 Article 12 deals with "Term and Termination" and the relevant sub Articles read as follows:- "12.1 This Agreement shall subsist for the Term and the terms and conditions of this Agreement shall apply to all Work carried out (or which should in accordance with this Agreement and/or any applicable RFS have been carried out) during the Term. This Agreement may be terminated as follows: ….. b) notwithstanding the above provisions, by notice from the Contractor to the Customer having immediate effect, when the Customer is in default in the punctual payment of any sum due to Contractor and, following receipt of written notice of default from the Contractor, fails to cure the default within twenty (20) business days after the receipt of such notice. 12.3 This Agreement may be terminated or cancelled at any time by mutual written consent of the Parties. 12.4 In the event of this Agreement being terminated by notice or otherwise, such termination shall be without prejudice to any rights and liabilities accrued prior to the termination. 12.6 Any termination by a Party by reason of the other Party's default or by reason of insolvency or similar circumstances affecting the other will be without prejudice to all the other rights and remedies of such Party by reason of the other's default." 13 Article 13 entitled "Miscellaneous" provides that the Agreement is subject to English law and the jurisdiction of the English courts. It also provides: "13.9 Nothing in this Agreement is to be construed as imposing on the Customer any obligation to have any services performed by Contractor on any of its Aircraft Fleet or any part thereof, unless and until the Customer in its discretion issues an RFS in respect of services on the particular Aircraft therein specified. Notwithstanding the foregoing Customer agrees that it will not during the Term have scheduled maintenance of the nature described in this Agreement carried out by any other contractor unless either (i) Customer has reasonably determined that Contractor is likely to be unable to complete such scheduled maintenance by the due date required by Customer or (ii) in relation to any Aircraft on which Contractor shall have previously completed Work under this Agreement Contractor has failed to complete such Work by its Scheduled Completion Date (as the same may have been extended by Article 4.2)." 14 Appendix F contained a list of planned dates for particular WCSs for the 7 aircraft scheduled for service by Tarom in 2004/5. It is agreed that the dates slipped for the 4 later ones. For subsequent winter seasons starting on 1 September, the slots were such dates as Jet2 might specify in a notice by at least 9 months beforehand (i.e. by 1 December), as confirmed in a second notice by 3 months in advance (i.e. by 1 June). The second notice could add further dates”. ""Aircraft" / "Aircraft Fleet"– in essence, any Boeing 737 operated by Jet2, in respect of which Tarom might be asked to perform Work pursuant to an RFS. "RFS"– a Request for Service, defined by the example appended to the Agreement. "Term"– 3 years, but extendable under Article 16, which gave Jet2 a unilateral option to extend for a further 3 years on the same terms unless the parties agreed variations before the end of the first 3 years; "Work" – services requested by Jet2 under an RFS or otherwise carried out under the Agreement. In practice this was base maintenance work, known as or carried out during the course of C-Checks; "Work Commencement Slots" – called by the parties "slots" or "WCSs", but defined as dates set out in Appendix F and in respect of which an RFS is delivered. "Working Day" included Saturday mornings and excluded any day which was a public holiday in Bucharest. "12.1 This Agreement shall subsist for the Term and the terms and conditions of this Agreement shall apply to all Work carried out (or which should in accordance with this Agreement and/or any applicable RFS have been carried out) during the Term. This Agreement may be terminated as follows: ….. b) notwithstanding the above provisions, by notice from the Contractor to the Customer having immediate effect, when the Customer is in default in the punctual payment of any sum due to Contractor and, following receipt of written notice of default from the Contractor, fails to cure the default within twenty (20) business days after the receipt of such notice. 12.3 This Agreement may be terminated or cancelled at any time by mutual written consent of the Parties. 12.4 In the event of this Agreement being terminated by notice or otherwise, such termination shall be without prejudice to any rights and liabilities accrued prior to the termination. 12.6 Any termination by a Party by reason of the other Party's default or by reason of insolvency or similar circumstances affecting the other will be without prejudice to all the other rights and remedies of such Party by reason of the other's default." "13.9 Nothing in this Agreement is to be construed as imposing on the Customer any obligation to have any services performed by Contractor on any of its Aircraft Fleet or any part thereof, unless and until the Customer in its discretion issues an RFS in respect of services on the particular Aircraft therein specified. Notwithstanding the foregoing Customer agrees that it will not during the Term have scheduled maintenance of the nature described in this Agreement carried out by any other contractor unless either (i) Customer has reasonably determined that Contractor is likely to be unable to complete such scheduled maintenance by the due date required by Customer or (ii) in relation to any Aircraft on which Contractor shall have previously completed Work under this Agreement Contractor has failed to complete such Work by its Scheduled Completion Date (as the same may have been extended by Article 4.2)." How it worked[6]As the judge explained, in essence the Agreement operated as follows. By 1 December in each year Jet2 had to notify Tarom of its requirement for Work Commencement Slots (hereafter “slots”) for the 12 months beginning on 1 September of the following year. That notification was subject to alteration and confirmation by 1 June of the following year. By 1 June Jet2 had(a) to provide Tarom with a maintenance plan showing the dates of each proposed slot by aircraft and C-Check type; and(b) to pay a deposit of US $ 10,000 or $ 20,000 per aircraft depending on the C- Check type required.[7]In relation to each aircraft Jet2 would prepare and send to Tarom a draft Request for Services (“RFS”) in the form of Attachment 1 to the Agreement which set out (in a “workscope”)(a) the tasks required for the aircraft in question,(b) a calculation of the Aircraft Down Time and(c) a Scheduled Completion Date.[8]The workscope would include routine maintenance work according to the Boeing Maintenance Planning Document (“BMPD”) and other maintenance required or recommended by Airworthiness Directives (“Ads”) or Service Bulletins (“SBs”). Appendix G provided a formula for calculating the cost of such routine work, based upon the man hours in the BMPD / AD / SB documents multiplied by a factor of 1.8 for BMPD or 2 for AD/SB hours, at a rate of US$26 per man hour. The workscope could also include other optional work desired by Jet2 (“Customer Requests”) – which was also to be priced at US $ 26 per man hour.[9]Tarom would then calculate the offered price of the maintenance requested in the draft RFS. The hourly rate was set at $ 26 and the man hours for the routine work was specified in the BMPD / AD / SB documents. So the only room for negotiation was as to the number of man hours which the optional tasks requested would take. Article 2.1 provided for a finalised RFS to be issued 60 days before the start of the slot, the price having been agreed. Once the RFS was agreed and received Tarom would invoice Jet2 half of the agreed price, less the deposit already paid and that invoice was due for payment on or before delivery of the aircraft: Article 3.1. (a).[10]After delivery of the aircraft the first third of the scheduled maintenance period was designated as a Work Inspection Period during which Tarom might notify Jet2 of extraordinary defects so as to enable the parties to agree any reasonable extension of the Scheduled Completion Date: Article 4.2. In the course of the C-Check any extra work found to be necessary on account of defects (“ground findings”) would be done against Non Routine Cards (“NRCs”) and Jet2 might request additional work (“Customer Requests”). Work done against NRCs and Customer Requests was sometimes referred to as Additional Work. The agreed price for the RFS was calculated so as to include an allowance for a fixed number of hours to be spent on NRCs: Appendix G.[11]Tarom agreed(i) to complete the Work in respect of each Aircraft by the Scheduled Completion Date and to ensure that whilst a Jet2 aircraft was at its base at least 30 people would at all times during the working day, 5½ days a week, be working exclusively on that aircraft: Article 4.6; and(ii) that if at any time it appeared that completion of the Work might be delayed beyond its Scheduled Completion Date, to take all possible action to complete the work in the time agreed in the RFS, working outside of normal working hours if necessary at no additional cost: Article 4.9.[12]Article 9 provided for a representative of Jet2 to be stationed at Tarom. That representative was Mr Peter Lloyd. His role involved monitoring the maintenance work, authorising NRCs (under Article 4.8), agreeing the price for Additional Work (usually by reference to the hours it should have taken), and liaising between Jet2 and Tarom. When the work was complete, Tarom would release the Aircraft to Jet2: Article 5. The Agreement called for payment against an invoice for the second 50% of the RFS price before release: Articles 3.1(b) and 5.4.[13]After the work on an aircraft was complete 'working papers' would be sent to Mr Lloyd detailing hours and materials spent on Additional Work and third parties / subcontractors (most importantly, Boeing). He would negotiate and then approve these papers, from which the price for the Additional Work could be calculated at the hourly rate of $ 26 (Article 3.1 and Appendix G, §3), taking account of the NRC Allowance. Separate invoices would be sent for ground findings, Customer Requests and third party works, payable within 30 days.[14]In practice the parties were not strict in the application of the terms or the operation of time limits. Thus the notification of slots took the form of a broad statement of the number of maintenance bays (lines) that would be required for the winter and the 1 December deadline was never complied with. The maintenance plan was subject to adjustments, including the switching of aircraft after 1 June. Tarom allowed Jet2 to reallocate deposits where necessary. The RFS was commonly finalised later than 60 days before the start of the relevant slot. Tarom allowed Jet2 credit on the 50% due before the release of the aircraft.[15]The Agreement did not oblige Jet2 to send a single aircraft to Tarom. But if Tarom performed its obligations timeously Jet2 had the benefit of the last sentence of Article 3.1 which provided that “Throughout the Term the man hour labour rate for all Work under this Agreement will be a firm fixed rate of US $ 26”. That rate was a favourable one and became more so as time passed. Provided, therefore, that Tarom was in a position to perform its side of the bargain and continued to do so, it was in Jet2’s interests to send its aircraft to Tarom for maintenance. Conversely fulfilment of the Agreement at $ 26 an hour became increasingly disadvantageous to Tarom. The History[16]In 2004/5 Tarom carried out checks under the Agreement on 7 of Jet2‘s aircraft, of which 6 were carried out in winter. In 2005/6 another 9 checks were carried out, 7 of them in winter. In the summer of 2006 some 14 RFSs were sent to Tarom for 2006/7. Until around the end of 2006 matters proceeded fairly satisfactorily. But in November 2006 serious delays began to occur in the completion of C-Checks on Jet2’s aircraft. The main difficulty for Tarom, as found by the judge, lay in recruiting and retaining competent labour given the $ 26 per hour rate in the Agreement. In late 2006 Tarom indicated to Jet2 that it wished to renegotiate the terms of the Agreement.[17]On 19 December 2006 Jet2 extended the Agreement so as to run until 26 July 2010 pursuant to Article 16.[18]On 22 December 2006 Mr White sent the following email to Mr Ionascu of Tarom:
“A note to confirm that currently we expect to require 2 concurrent, simultaneous Maintenance Slots at Tarom – for the period October 07 to 30th April 2008”
. In other words Jet2 reserved two lines for the whole of the winter. 2007[19]In January 2007 Jet2 obtained the necessary approval to carry out its own C-Checks at Leeds Bradford airport. It did so because, so it said, it needed to do work which Tarom should have done under the Agreement but was unwilling to carry out. From February 2007, Jet2 started to carry out some C-Checks in a hangar space which it had leased from 1 May 2006.[20]In the first months of 2007 C-Checks on 4 aircraft were running seriously late. Aircraft G – CELS was not sent to Tarom because of concerns about these delays. In 2007 aircraft were still in maintenance in the summer months and Jet2 had to wet lease aircraft to complete its flying programme.[21]On 16 March Mr John White, Jet2’s General Manager of Projects and Planning, sent Tarom a draft maintenance plan for 2007/8. On 20 March he had a meeting with two Tarom personnel. He was left with the impression that Tarom was continuing to lose manpower, its staff of 200 now being down to 120. Tarom was offering only a single line of maintenance throughout the year (although it could provide two lines sometimes) when Jet2 required two in winter and 1 in summer. He came to the conclusion that Jet2 would have to look for another base maintenance provider to supplement Tarom unless things improved fast. Negotiations[22]On 11 April a meeting took place between Jet2 and Tarom at which Tarom made plain its wish to renegotiate the Agreement; but did not in terms say that it would not perform. On 4 May Tarom sent Jet2 a draft of proposed amendments to the Agreement. On 16 May Jet2 said that it would respond to that letter in a timely manner. Planes G-CELD[23]Meanwhile in early May Jet2 had put G-CELD in for maintenance with Tarom. That aircraft was redelivered to Jet2 on 15 June. G-CELB[24]On 9 May Jet2 sent Tarom a draft RFS in respect of G-CELB. On 23 May 2007 Tarom sent Jet2 a quote for that aircraft with a view to induction on 15 June 2007 and Jet2 accepted it the next day. In the event the plane was sent to Leeds for maintenance in August because Jet2 was concerned that it would be delayed if entrusted to Tarom. Slots for 2007/8[25]On 23 May Mr Ionascu of Tarom, responding to an email from Mr White chasing him for a quote for G-CELB had said “...be aware that we’ll not commit ourselves for any new a/c until the amendment to the contract… be agreed and signed”. On 29 May Jet2 sent Tarom a maintenance plan for August 2007 to July 2008 which constituted notice those slots were being reserved under Article 2 and Appendix F of the Agreement; and informed Tarom of the $ 170,000 that had been transferred to them for slot deposits for 12 aircraft for 2007/8.[26]On 31 May Tarom emailed Jet2 to say that it was premature to discuss slots for 2007/8 because they had not agreed on the terms governing an extension of the Agreement. In the email Tarom claimed that $ 80,902.74 was due then and that $ 110,172.12 would be due on June 10 in respect of G-CELP. It said that it was appropriate to apply the $ 170,000 against those two sums and for the remaining $ 21,074.86 to be paid no later than June 10. Tarom asked for Jet2’s acceptance of the proposed amendments to the Agreement before the end of the week.[27]The $ 80,902.74 covered six invoices then allegedly overdue. The judge found that none of them were (para 24). In a later paragraph (53) he referred to the fact that $ 6,194 was arguably due for an engine change carried out in July 2006 for which Tarom had not chased. Jet2 objected to the application of the $ 170,000 as suggested. On 10 June it paid $ 74,433.35.[28]In the event no RFSs and no aircraft were sent to Tarom for 2007/8 because Jet2 was concerned about the likelihood of delay. Negotiations with JAT Tehnika[29]Meanwhile Jet2 was in discussions with another service provider – JAT Tehnika (“JAT”) in Belgrade. Initial contact was made on 29 April. At a meeting in Belgrade on 16 May JAT made a favourable impression. On 30 May JAT said it could service at € 35 per hour. On 31 May Mr White sent JAT an RFS for G-CELB and asked for an indicative price and downtime for the aircraft. On 20 June Jet2 sent JAT an RFS in respect of G-CELH. On 31 July Jet2 signed an agreement with JAT in a similar form to the Agreement and then paid a deposit of € 49,000 for 7 slots for 2007/8. On 15 June Mr Lloyd left Tarom; on 6 August 2007 he went to JAT. On 4 September Jet2 started sending aircraft to JAT. On 5 September it said it was ready to send out 2 draft RFS in respect of G-CELY and G-CELI.[30]On 26 July Tarom told Jet2 that, unless Jet2 answered that day Tarom’s request to extend a deadline for renegotiation, it would renounce the Agreement. Jet2 replied saying that discussions could continue in the absence of agreed amendments and that the Agreement would meanwhile continue on the same terms. In the email attaching the letter it looked forward to continuing the relationship. On 27 July Tarom said that the current wording was such that Tarom was unable to perform. Thereafter Jet2 sent letters on 7, 13 and 23 August declining proposed amendments. On 18 August Tarom requested a draft of works planning for 2007/8.[31]On 10 September Tarom terminated the Agreement for want of punctual payment of $ 191,080.06. On 18 September Jet2 told Tarom that it agreed that the Agreement had come to an end but said that it terminated in April 2007 when Tarom made it clear that it would be unable to continue on the current terms. The judgment of 15 March 2012[32]In his judgment of 15 March 2012 the judge held(i) that the email of 31 May 2007 was not a valid notice under clause 12.1 (b);(ii) that time for payment of the $ 110,172.12 in respect of the invoices for G-CELP was not of the essence so that non payment was not fatal; and(iii) that, to the extent that, prior to 10 September 2007 there had been repudiatory conduct by Tarom, Jet2 had affirmed the Agreement. Tarom’s letter of 10 September 2007 was a renunciation of the Agreement which was accepted by Jet2’s letter of 18 September 2007 (even though it gave a wrong reason) so that in principle Jet2 could recover damages.[33]As to damages he said that the question was which of the C-Checks in respect of which Jet2 claimed damages in the action would Jet2 have had carried out by Tarom if Tarom had not renounced the Agreement. In a later passage he expressed the question as being: what damages did Jet2 suffer as a result of not being able to have the benefit of the Agreement from 18 September 2007 until 26 July 2010? This involved taking a view, assuming that Tarom was willing to comply with its obligations under the Agreement, about which, if any, aircraft C-Checks Jet2 would have asked Tarom to carry out in that period, and how much extra, if anything, Jet2 has had to pay others to do the work instead.[34]He rejected the submission that Tarom would not have been legally obliged to maintain Jet2’s aircraft for the winter 2007/8 because Jet2 had not given notice of WCSs in accordance with Appendix F nor served RFSs for any of its aircraft as required by clause 2.1.[35]The judge found that, with the exception of G-CELH, Jet2 had made no plans which were technically irrevocable to have all C-Checks done by JAT or at Leeds. But for prudent business reasons Jet2 was “all set” to have its C-Check maintenance in the coming season done at JAT or at Leeds. The critical assumption[36]The judge held that, for the purposes of assessing damages, he had to assume that Tarom would have performed its obligations under the Agreement when called upon to do so. That meant assessing Tarom as it should have performed from September onwards, not on the basis of its earlier shortcomings. He held that by the time the repudiation was accepted plans for the 2007/8 season were well advanced but Tarom could have held itself ready to continue to honour its obligations under the Agreement. By that stage Jet2 was largely committed for the following season for reasons which were the fault of Tarom but not causally connected to the acceptance of the repudiation.[37]In paragraph 85 he said this:
“As Mr White saw it JAT had been "pencilled in" and, given the lack of reassurance from Tarom as late as August 2007, it was more likely than not that JAT would perform the work. I have no reason to doubt that assessment. If that reassurance had come in and/or Jet2 had been able to assume that Tarom would comply with its obligations under the Agreement I consider that Tarom would have got some, but since this was happening at a relatively late stage, not all of the work. Presumably some things were at an advanced stage and it might have been commercially unwise, having signed up JAT and paid deposits for Jet2 to give them no work for the season after all (apart from G-CELH). It seems from the schedules that for the 2007/2008 season four aircraft went to Leeds and six to JAT. The fact that the technical and operational staff (although, as I accept, not senior management) had largely written off Tarom suggests that in practice Jet2 were unenthusiastic about using Tarom. Mr Menzies had sought to focus staff on to JAT and away from Tarom. I conclude however that if Tarom had expressed its willingness to perform and shown that it was taking some steps to do so, at least some but not all these aircraft would have been placed with it over the 2007/2008 season. I will hear more argument about that before taking a final view.” [Emphasis added]
[Emphasis added][38]He also held that aircraft would have been placed with Tarom in the remaining seasons until July 2010 because of the low rate. If Tarom performed to the standard required by the Agreement it would have received much if not most of the works until July 2010.[39]On 15 March 2012 an order was made that the matter be listed for a further hearing limited to issues relating to quantum of damages. The judgment of 11 October 2012[40]In his judgment of 11 October 2012, following two days of hearing on 18 and 19 July, the judge held that Jet2 would have required Tarom to service 5 aircraft in 2007/8; 8 aircraft in 2008/9 and 6 in 2009/10. He also determined thirteen items of disagreement in relation to the schedules prepared by Jet2 in respect of its damages. In the result judgment was entered for $ 3,830,512.85 plus interest on the basis of the judge’s findings (subject to a set off of $ 360,159.20) in respect of sums due to Tarom; and the sole remaining issue on damages was transferred to the Mercantile Court for determination there. Tarom’s principal case[41]Tarom contends that the judge’s approach was fundamentally wrong. He assumed that Tarom would have been willing to act in compliance with its contractual obligations and considered what Jet2’s approach would have been on that assumption. What he should have done was to base himself on the actual facts. These were that Tarom was not willing to act in compliance with its contractual obligations and that Jet2’s management were not minded to employ Tarom in the light of Tarom’s failings and its attitude to the Agreement. If the Agreement had bound Jet2 to employ Tarom that inquiry would not have been necessary – the assumption would be that Jet2 would employ them. But, in circumstances where Jet2 had a choice, it was necessary to look at what it would have done in the light of the actual facts.[42]The judge compounded his error in the following way. He found that Jet2 would only have decided to send further aircraft if either(a) Tarom had provided Jet2 with reassurance that it would be able to comply with its obligations; or(b) Jet2 had been able to assume that Tarom would comply with them. But he never found that Tarom was bound to provide such reassurance or that it would have done so; or that Jet2 either could or did assume that Tarom would comply with its obligations. If the judge had considered the question of causation on the basis of fact and not assumption he would have concluded that no aircraft would have been sent to Tarom in the remainder of the term.[43]Tarom accepted that, if any aircraft had been sent to it by Jet2, it was legitimate to assume, for the purpose of calculating damages, that Tarom would have performed its obligations at the contract price in respect of it. But for the purposes of determining whether Jet2 would have sent an aircraft to Tarom at all, matters had to be approached by reference to the actual facts. Analysis[44]When Jet2 accepted Tarom’s renunciation of the Agreement it became entitled to recover the value of the contractual benefits which it had lost as a result. Since Jet2 was not bound to send any aircraft to Tarom, any determination of the value of what it had lost required an assessment of the number of aircraft, if any, that Jet2 would have sent to Tarom during the remainder of the term of the Agreement had it not been terminated. The result of that assessment depends on what assumptions are to be made as to Tarom’s performance had the Agreement continued.[45]In my judgment the assumption by reference to which the assessment should be made is that Tarom was in fact ready, able and willing to carry out the Agreement in accordance with its terms. The assumption is, of course, a fiction since the factual circumstance by reference to which it falls to be made is that Tarom had declared an intention not to perform at all and showed signs of inability to do so. But in order to give Jet2 the benefit of the Agreement it is necessary to assume that, if asked, Tarom could and would perform as it was legally bound to do. It is also necessary to assume that that fact was apparent to Jet2.[46]If a person agrees to perform services at the request of another he holds himself out as able and prepared to do what he has promised. If, then, he renounces his obligations it makes no sense to assume that, if he had been asked to do so, he could and would have performed but that, until then, he would not seek to show, nor could his contractual counterparty assume, that that was or would be so. Quite apart from the unlikelihood of someone who was ready, willing and able to perform keeping that secret, the approach suggested would mean that the court was entitled to make that assumption but that the innocent party was not. The innocent party’s entitlement to damages is not to be determined on the basis that the assumed ability and preparedness of its counterparty to perform was, so far as it was concerned, a secret.[47]Such an approach would have perverse consequences. Tarom submits that the question whether or not Jet2 would have sent it any aircraft must be looked at in the light of the position as at the date the repudiation was accepted. At that stage Tarom had shown itself unwilling to comply with its obligations and Jet2 was sceptical whether it would or could do so. If this be right, the effect is that, in a contract such as this, where the use of the contract breaker’s services is optional, the contract breaker benefits from his own breach. The more insistently he has said that he cannot or will not perform, or perform fully, and the greater the extent to which he breaks his contract, the less likely can it be said to be that the innocent party will seek to employ him. When the contract breaker refuses to perform at all he would then seek to escape liability by saying that, with that background in fact, the innocent party, not being bound to engage him, would not have done so.[48]On the judge’s findings (which in this respect did not depend on assumptions) Jet2 had not by September 2007 reached a decision never to use Tarom again for the remainder of the term, whatever the circumstances. More importantly, on the assumption that Tarom could and would perform in accordance with the Agreement and that this was apparent to Jet2, Jet2 would, as he found, have wished to employ Tarom, in order to take advantage of the very favourable hourly rate in the Agreement: see paragraphs 39, 40, 65, 69, 85 and 86. There was ample evidence from Jet2, whose witnesses the judge regarded as truthful, to support that conclusion.[49]Tarom made a distinction in its submissions to the judge (and to us) between questions of causation, i.e. whether Jet2 would have sent any aircraft to Tarom, and questions of assessment, i.e. how much cheaper that would have been for Jet2, submitting that there could be no assessment until causation was distinctly proved in the light of the actual facts whereas, when it came to assessing the damages in respect of any aircraft that would have been sent, the court would assume that Tarom would, in respect of any plane sent to it, perform in accordance with the Agreement. Thus, in relation to any decision whether to send a second aircraft, the court could assume that the first had been serviced in accordance with the contract.[50]Insofar as this distinction involves a different approach in respect of the two issues, it is fallacious. The relevant question is a composite one: on the assumption that Tarom had shown itself ready, willing and able to perform in accordance with the contract would Jet2 have sent any, and, if so, how many aircraft to Tarom, and, if so, how much cheaper, assuming that Tarom performed in accordance with the Agreement, would that have been?[51]What I have said is reflected in the observations of Patten LJ in Durham Tees Valley Airport v bmibaby [2011] 1 Lloyds Rep 68 at [79], to which

the judge referred:

"The court, in my view, has to conduct a factual inquiry as to how the contract would have been performed had it not been repudiated. Its performance is the only counter-factual assumption in the exercise. On the basis of that premise, the court has to look at the relevant economic and other surrounding circumstances to decide on the level of performance which the defendant would have adopted. The judge conducting the assessment must assume that the defendant would not have acted outside the terms of the contract and would have performed it in his own interests having regard to the relevant factors prevailing at the time. But the court is not required to make assumptions that the defaulting party would have acted uncommercially merely in order to spite the claimant. To that extent, the parties are to be assumed to have acted in good faith although with their own commercial interests very much in mind."
Tarom contends that these remarks were concerned with assessment not causation. I disagree. It does not seem to me that Patten LJ, with whom the other members of the Court agreed, was making any such distinction.[52]The judge was not, therefore, in error in proceeding, for the purpose of determining damages, on the basis that Tarom had shown, or Jet2 could assume, that Tarom could and would perform. Tarom complains that the judge was not at the second hearing (at which no further evidence was, or was sought to be, tendered) prepared to entertain argument on the causation question. What the judge said in his second judgment was that causation was distinctly proved by the facts as he had found them to be and that he should not depart from the approach he had taken in his first judgment unless he was now convinced that it was wrong, which he was not. In my view the judge was not in error. He was entitled to remain of the view that Jet2 would, on the assumption which he made, have sent some aircraft to Tarom and then to proceed, as he did, to determine how many aircraft that would be. Tarom’s case in relation to 2007/8[53]Tarom contends that it was entitled to refuse to maintain any of Jet2’s aircraft in 2007/8 because Jet2 had failed to serve a notice of WCS in accordance with Appendix F. That Appendix specified the dates for the Work Commencement Slots for the term of the Agreement, including any extension thereof under Article 16. Paragraphs 4, 5 and 6 read: “4 Any and all such dates during the period from 1st September 2006 to 31st August 2007 as may be specified in a notice from the Customer to the Contractor given not later than 1st December 2005 and which are confirmed by the Customer in a further notice to the Contractor given not later than 1st June 2006, together with any further date or dates specified by the Customer in such notice to the Contractor given not later that 1st June 2007. 5 Similarly to 4 above in respect of each period from 1st September to 31st August during each of the further three years of the Term, in the event that the Term is extended by the Customer in accordance with Article 14. 6 In relation to each Commencement Date the Customer will specify the category of Check to be carried out on the Aircraft to which such Work Commencement Date relates”.[54]The notice that was served was the email of 22 December 2006 which was(a) after 1 December 2006; and(b) did not specify a Commencement Date, aircraft or category of C-Check. Tarom submitted that this was fatal to any claim for 2007/8 because it was of the essence that a contractually compliant notice was given in time. Otherwise Tarom would have to keep slots open until 1 June 2007 without any deposit and would be unable to offer them to others without risk of overbooking.[55]The judge rejected the suggestion that a term should be implied into the Agreement that, in respect of 2007/8, no notice had to be given by 1 December if the agreement had not been renewed by that date. He, also, found that time was not of the essence. He was right in both respects.[56]As to the former, Appendix F, para 4 clearly requires a notice by 1 December 2006 in respect of 2007/8 and there is no need to imply a term which contradicts this express provision nor any justification for doing so. It was always open to Jet2 to serve a protective notice by 1 December which would lapse if there was no renewal.[57]As to the latter, the provision for notice to be given by 1 December was of very limited practical comfort to Tarom. Any date specified in such a notice would have to be confirmed by the 1st June following. By no later than that date Jet2 could specify one or more further dates. So any date(s) specified by 1 December could be left unconfirmed; and any date not specified could be added. Any pre-1 December notice was about as provisional as it is possible to be and did not, of itself, give rise to any entitlement for the following year. It is the pre-1 June notice that identifies the slots for the following year as a result of which an RFS may be issued for a slot. In those circumstances it is commercially unrealistic to regard service of an Article F compliant notice by 1 December as a condition precedent to any entitlement to make an RFS for the year beginning from the next September. As it was, Jet2 by its email of 19 December reserved two bays for the whole winter. The notice of 29 May 2007 may properly be regarded as a further notice specifying further dates.[58]In the light of this conclusion it is not necessary to consider whether the conduct of the parties gave rise to some form of waiver or estoppel preventing Tarom from relying on the email of 19 December 2006 as being late or defective; or whether it was open to Jet2, which never pleaded waiver or estoppel, to rely on it.[59]Accordingly I would dismiss the appeal. LORD JUSTICE BRIGGS[60]I agree. THE MASTER OF THE ROLLS[61]I agree.

Cited in 1 later judgment