6/13/2023 0 Comments Wells fargo online dispute![]() ![]() It provides amongst other things for certain remedies to be made available to creditors in respect of international interests relating to aircraft objects – which category of creditors includes lessors of engines such as the Lessor. The CTC, and its associated Aircraft Protocol, has been in force since 2006 and now has over 80 Contracting States, including Australia. This briefing analyses the reasoning behind that decision and considers exactly what obligations Article XI.2 imposes on CTC debtors (or their insolvency administrators). The Lessor’s rights against the Lessee for breach of contract would be limited to a claim for damages, ranking pari passu with the Lessee’s other unsecured creditors. The High Court of Australia ruled in favour of the Lessee and its administrators. The extent to which that approach can be maintained depends on the correct interpretation of the CTC, which must prevail. That is in contrast to the traditional approach of a court seised of an issue in the course of insolvency proceedings, which will be protective of the interests of the general body of creditors. ![]() Part of that confidence is intended to be engendered by the improvement of CTC creditors’ rights on their debtors’ insolvency. That question needs to be considered in the light of the stated objective of the CTC to give intending creditors greater confidence in the decision to grant credit and so to reduce borrowing (and leasing) costs. The case therefore addresses whether, following the occurrence of an event of default occasioned by the commencement of insolvency proceedings in respect of a lessee in a Contracting State, the expenses incurred in returning the engines to the contractually-required redelivery location are primarily to be borne by the lessor or by the general body of creditors of the lessee. Sixty days after the appointment of the administrators, Willis made a demand for redelivery of the engines to the location specified in the GTA, which the administrators rejected. The administrators on the same day proffered to Willis an opportunity to take control of the engines where they happened then to be located, in Australia, which was in turn rejected by the Lessor. The GTA provided for the redelivery of the engines upon the termination of the leases to a location in Florida, alongside various other redelivery conditions. This constituted an event of default under the leases as specified in the GTA. The Lessee appointed administrators on April 20, 2020. The Lessor was the legal owner of the engines, holding them on trust for Willis Lease Finance Corporation (Willis). Wells Fargo Trust Company (Lessor) had leased four aircraft engines to VB Leaseco (Lessee), part of the Virgin Australia group, under operating leases, the terms of which were substantially documented in a General Terms Agreement (GTA). However, the judgment leaves many questions unanswered and its reasoning is open to challenge. Given the requirement, in Article 5.1 of the CTC, that, in its interpretation, “regard is to be had to the need to promote uniformity and predictability in its application”, the decision is one that could have strong persuasive authority before the courts of other Contracting States. Although the issue had previously been addressed by the High Court in Ireland in a judgment relating to the examinership of Norwegian Air Shuttle (the NAS Case) 2, this is the first time that the issue has been considered in detail by a senior appellate court. It is a case which impacts considerably on the competing interests of aircraft and engine lessors and the general body of creditors of an airline subject to insolvency proceedings in a CTC Contracting State. ![]() The High Court of Australia, the highest appellate court in that jurisdiction, recently addressed the meaning of the words “give possession” in Article XI.2 of the Aircraft Protocol to the Cape Town Convention (CTC) 1. ![]()
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