“9. Events of default 9.1 Defaults There shall be default if: (a) [SkyJets]…defaults in the payment of principal or interest or any other sum payable under any Transaction Document [which included the Loan Agreement and the Mortgage (and guarantee)] or fails to insure or maintain the Aircraft in accordance with the requirements of the Aircraft Mortgage or is in breach of any of its obligations under any Transaction Document; … (o) any representation, warranty or statement made to [Lombard] by [SkyJets, Skytime or Mr Westlake] in or connection with any Transaction Document proves to have been incorrect in any material respect when made (or deemed made) or if repeated at any time by reference to the facts or circumstances subsisting at that time, would no longer be true and correct in all material respects; (p) in the opinion of [Lombard], a material adverse change occurs in the business, assets, conditions, operations or prospects of There shall be default if: [SkyJets, Skytime or Mr Westlake] … 9.2 Acceleration At any time after the occurrence of an Event of Default [Lombard] may by notice to [SkyJets]: (a) cancel the Facility and require [SkyJets] immediately to repay the Loan together with accrued interest and all other sums payable under this Agreement or any other Transaction Document, whereupon the same shall become immediately due and payable… Upon the service of any such notice [Lombard’s] obligations under this Agreement shall be terminated.” … 13. Demand or notice Any demand or notice on [SkyJets] under this Agreement or any other Transaction Document shall be made in writing signed by an officer of [Lombard] and served either by personal delivery on any officer of [SkyJets] at any place or by post or by hand delivery addressed to its registered office…”
“SkyJets, as borrower, was afforded no period of grace to rectify or otherwise remedy the breach, regardless of the scale of the breach, regardless of the period of breach, regardless when the breach had occurred and later been remedied, regardless of the cause of default (e.g. misrepresentation by the bank) and regardless of the consequences.”
“Under clause 9.1 of the Agreement the failure to make any payment under the Agreement is an Event of Default. Clause 9.2 of the Agreement therefore applies. In accordance with clause 9.2 we hereby give you notice that the loan facility contained in the Agreement is cancelled and you are therefore required to immediately pay the full amount due under the loan facility. The sum due from you is currently US$5,879,361.06 . As you are aware, in support of the Agreement, you entered into an Aircraft Mortgage (the Mortgage). In accordance with clause 8.1 of the Mortgage we hereby give you notice that the Aircraft, as the security under the Mortgage, has become enforceable and we are exercising our powers and remedies as mortgagee of the Aircraft. These powers and remedies include the obtaining of possession of the Aircraft and appointing an agent to sell the Aircraft.”
“I write further to the letter dated19 September 2012 sent to you by solicitors. As you were made aware from that letter you are currently in arrears in respect of the Agreement. Whilst I recognise the attempts that you have made to reduce the arrears, including the part payments of US$248,408.49 on5 October 2012 and a further US$165,599.36 on9 October 2012 , there are still arrears totalling£294,376.92 outstanding.”£294,376.92 outstanding.”
“However, as the Claimant has argued, the reduced rent enshrined in the Side Letter is properly to be regarded as part of the substantial bargain made by it and the lessor. It does therefore seem that the parties cannot have meant that a trivial breach of contract by the Claimant would entitle the lessor to put an end to the Side Letter. Among all the obligations arising from the terms of the lease and documents supplementary to it, there is bound to be a trivial breach of some obligation from time to time. That is particularly so where, as here, there is an obligation to keep the Premises in good and substantial repair and condition. I therefore agree with the Defendant that some qualification is necessarily implicit in the terms of the Side Letter, otherwise the bargain for the Claimant to be entitled to pay a reduced rent becomes little more than a concession at the whim of the lessor. If the terms of the Side Letter are to have any sensible commercial effect, it is necessary to exclude a trivial (or de minimis) breach of covenant from triggering the lessor's right to terminate the Side Letter. But in my judgment it is not necessary that any breach would have to be "material" or "substantial" in a colloquial sense (as opposed to the more legalistic sense of a breach that is more than trivial) before the termination provision could be activated. Although there may be a dispute about whether a particular breach is trivial, there is no real difficulty in applying such a test, whereas the test of materiality is fraught with conceptual uncertainty.”
“If, on the contrary, the debtor is in a position to pay off the sum demanded and wishes to know the exact and precise sum, he can communicate with the creditor and ask the creditor what sum he is expecting to be paid. And, under those circumstances, one imagines that the creditor would say: 'Well, the last accounts, which are not complete, show in fact a sum of £X owing from you. If you can pay that sum at once, then we need not worry too much about the additional sum, we can settle that later', or something along those lines…”
“It is common for loan agreements to specify a default rate of interest, i.e. a higher rate which applies after the borrower's default. In Lordsvale Finance plc v Bank of Zambia ([1996] 3 WLR 688 ), Colman J had to decide whether a default rate of interest is a penalty as being a stipulation for payment of money in terrorem of the offending party rather than a genuine pre-estimate of damage (propositions 2 and 3 in the speech of Lord Dunedin in Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd). He held that it was not. The trend in the authorities following Lordsvale is that provisions in loan agreements for uplifting the interest rate for the future after a default should not be regarded as penalties (unless the uplift is evidently extravagant), such provisions being commercially justifiable because the default bears on the credit risk and the cost of administering the loan. This development of the law was approved by the Supreme Court in Makdessi v Cavendish Square Holdings BV. In that case the Supreme Court took the opportunity to review the law on penalties generally, and held that the 'true test is whether the impugned provision is a secondary obligation which imposes a detriment on the contract-breaker out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation'.”
“146. In Lordsvale Finance Colman J was concerned with a loan agreement providing that the rate of interest would increase prospectively from the time of default in payment. He noted, at pp 763-764 (italics added): “… the borrower in default is not the same credit risk as the prospective borrower with whom the loan agreement was first negotiated. Merely for the pre-existing rate of interest to continue to accrue on the outstanding amount of the debt would not reflect the fact that the borrower no longer has a clean record. Given that money is more expensive for a less good credit risk than for a good credit risk, there would in principle seem to be no reason to deduce that a small rateable increase in interest charged prospectively upon default would have the dominant purpose of deterring default. That is not because there is in any real sense a genuine pre-estimate of loss, but because there is a good commercial reason for deducing that deterrence of breach is not the dominant contractual purpose of the term. It is perfectly true that for upwards of a century the courts have been at pains to define penalties by means of distinguishing them for liquidated damages clauses. The question that has always had to be addressed is therefore whether the alleged penalty clause can pass muster as a genuine pre-estimate of loss. That is because the payment of liquidated damages is the most prevalent purpose for which an additional payment on breach might be required under a contract. However, the jurisdiction in relation to penalty clauses is concerned not primarily with the enforcement of inoffensive liquidated damages clauses but rather with protection against the effect of penalty clauses. There would therefore seem to be no reason in principle why a contractual provision the effect of which was to increase the consideration payable under an executory contract upon the happening of a default should be struck down as a penalty if the increase could in the circumstances be explained as commercially justifiable, provided always that its dominant purpose was not to deter the other party from breach.” 147. In a whole series of cases across the world, courts have taken their cue from Lordsvale and held that provisions in loan agreements for uplifting the interest rate for the future after a default should not be regarded as penalties, save where the uplift is evidently extravagant: see eg Hong Leuong Finance Ltd v Tan Gin Huay[1999] 2 SLR 153 , Beil v Mansell (No 2)(2006) 2 Qd R 499,PSAL Ltd v Kellas-Sharpe[2012] QSC 31,Elberg v Fraval[2012]VSC 342,Place Concorde East Ltd Partnership v Shelter Corp of Canada Ltd(2003) 43 BLR (3d) 54and In re Mandarin Container[2004] 3 HKLRD 554 . 148. The rationale of these cases is that the default bears on the credit risk (and, as Beil v Mansell identifies, may also bear on the cost of administering the loan). The uplift is conditioned on the breach, but the breach reflects directly upon the continuing appropriateness of the originally agreed interest terms. In substance, the uplift amounts to a variation of the original terms. If on the other hand, it is evident from the size of the uplift that it is in its nature a punishment for or deterrent to breach, rather than an ordinary commercial re-rating to reflect a change in risk (or administration cost), then it will still be disallowed as a penalty – as the actual decisions in Hong Leuong, Beil v Mansell and Elberg v Fraval illustrate.”
“It is not suggested that it was penal to stipulate for the balance to become due on default, and I do not see how it could have been: such provisions are standard in agreements for payment of liabilities by agreed instalments, and CPC were already entitled to payment of the whole sum in any event: see The Angelic Star [1988] 1 Ll Rep 122 at 125 col 2 per Lord Donaldson MR ("the mere fact that the capital sum becomes immediately repayable upon a failure to comply with the conditions upon which credit was extended cannot constitute a penalty"). So the only question is whether, if the balance became due, it would be penal to stipulate for interest in addition. That too seems to me to be a standard provision in commercial loan agreements: once the debtor is in default, the creditor is not only being kept out of his money but running an enhanced credit risk: see the approval in Cavendish Square Holding BV v Makdessi of the decision of Colman J in Lordsvale Finance plc v Bank of Zambia[1996] QB 752 .”
“If a bank proceeds on the incorrect basis that a certain event of default occurred, it may be able subsequently to justify its actions by reference to facts then existing but not expressly relied on, even if only discovered later, which constituted an event of default. The bank would in any event be well-advised to draft its termination notices broadly.”
“16. The notice has not distinguished itself by being broad in that way, but what it does mean is that the bank could rely upon the default of or in connection with the engine maintenance and/or failure to maintain the outstanding loan at 133 per cent or less than the value of the aeroplane. 17. I understand and recognise that those facts may be in dispute, but the evidence I have seen is not particularly clear on the point from the defendant at least.”
“The general rule is the subject of a number of exceptions. First, a party cannot rely on a ground which he did not specify at the time of his refusal to perform “if the point which was not taken could have been put right”
“Contracting parties are free to stipulate that a particular act, such as payment of a rental instalment under an equipment lease, should not be taken to waive a right to terminate for an earlier breach.”
“I can, however, see no reason in principle why the parties to an equipment lease (which is really a financing transaction and different in many ways from a lease of real property) or other commercial contract, should not be free to stipulate that a particular act, such as payment of a rental instalment should not be taken to waive a right to terminate for an earlier breach. After all, such a provision may be very convenient and operate to the benefit of both parties. The finance company may want to encourage the lessee to correct the breach but not want him to fall behind with his payments while he does so. It may be in the interests of the lessee that the finance company should not have to take an early decision whether to terminate.”
“[21] The authorities relating to setting aside default judgments laid considerable emphasis on the desirability of doing justice between the parties on the merits. Delay in making an application to set aside rarely appears to have been a decisive factor if the defendant could show that he had a real prospect of defending the claim against him. Thus in J H Rayner (Mincing Lane Limited) v Café Norte S.A. Importadora e Exportadora S.A.[1999] EWCA Civ 2015 judgement was set aside after 7½ years on the applicants' showing that they had a defence with a real prospect of success. [22] The Civil Procedure Rules were intended to introduce a new era in civil litigation, in which both the parties and the courts were expected to pay more attention to promoting efficiency and avoiding delay. The overriding objective expressly recognised for the first time the importance of ensuring that cases are dealt with expeditiously and fairly and it is in that context that one finds for the first time in Rule 13.3(2) an explicit requirement for the court to have regard on an application of this kind to whether the application was made promptly. No other factor is specifically identified for consideration, which suggests that promptness now carries much greater weight than before. It is not a condition that must be satisfied before the court can grant relief, because other factors may carry sufficient weight to persuade the court that relief should be granted, even though the application was not made promptly. The strength of the defence may well be one…” (Emphasis added.)
“16.4 …There has obviously been a considerable delay since the judgment was entered. SkyJets has provided an explanation for the majority of the time, the reason being the difficulties that were encountered restoring both SkyJets and Skytime to the register…But there remains a period of 11 months (immediately after the Judgment was entered) [i.e. from17 January 2014 when default judgment was entered until17 December 2014 on the second day of the hearing before Master Kaye] which remains unexplained…” (Emphasis added.)
“…What are the reasons for it? [The delay]. We don’t know. What are the reasons for the lack of progress?...”
“[21] The authorities relating to setting aside default judgments laid considerable emphasis on the desirability of doing justice between the parties on the merits. Delay in making an application to set aside rarely appears to have been a decisive factor if the defendant could show that he had a real prospect of defending the claim against him. Thus in J H Rayner (Mincing Lane Limited) v Café Norte S.A. Importadora e Exportadora S.A.[1999] EWCA Civ 2015 judgement was set aside after 7½ years on the applicants' showing that they had a defence with a real prospect of success. [22] The Civil Procedure Rules were intended to introduce a new era in civil litigation, in which both the parties and the courts were expected to pay more attention to promoting efficiency and avoiding delay. The overriding objective expressly recognised for the first time the importance of ensuring that cases are dealt with expeditiously and fairly and it is in that context that one finds for the first time in Rule 13.3(2) an explicit requirement for the court to have regard on an application of this kind to whether the application was made promptly. No other factor is specifically identified for consideration, which suggests that promptness now carries much greater weight than before. It is not a condition that must be satisfied before the court can grant relief, because other factors may carry sufficient weight to persuade the court that relief should be granted, even though the application was not made promptly. The strength of the defence may well be one…” (Emphasis added.)
“The qualification is that it does not seem to me that the merits of any defence are ever irrelevant if by that the judge meant that the court will not even consider them. When it does consider them, it may conclude that they are of little or no weight. The court is engaged in an exercise of weighing delay against merits, which will include considering the nature and extent of the delay, the reason and any justification for it, the strength of the supposed defence and the justice of the case. The stronger the merits (and any justification for the delay) the more likely it is that the Court may be prepared to exercise its discretion to set aside a judgment regularly obtained despite the delay and vice versa. That is not to say that a real or even a good case on the merits will usually lead to the judgment being set aside despite significant delay since delay is now a much more potent factor than heretofore. If there is a marked and unjustified lack of promptness, that, itself, may now justify a refusal of relief because the delay is a factor that outweighs the defendants' prospect of success. As Moore Bick LJ recognised in Agrinvest the climate has changed with the introduction of the CPR from that which applied when this court in JH Rayner (Mincing Lane) Ltd v Cafenorte S.A. Importadora e Exportadora S.A.[1999] 2 Lloyds Rep 750 upheld a decision of his own setting aside a judgment after a delay of 7 ½ years.”
“5. …The decision-maker at trial will usually have a better grasp of the case as a whole, because of the added benefits of hearing the evidence tested, of receiving more developed submissions and of having more time in which to digest and reflect on the materials. 6. The outcome of a summary judgment application is more unpredictable than a trial. The result of the application can be influenced more than that of the trial by the degree of professional skill with which it is presented to the court and by the instinctive reaction of the tribunal to the pressured circumstances in which such applications are often made.”
“(v) However, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial: Royal Brompton Hospital NHS Trust v Hammond (No 5)[2001] EWCA Civ 550 ; vi) Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Co 100 Ltd[2007] FSR 63 ”