Aviation firm must pay £8million due under lease agreement    

An aviation firm must pay £8 million due under an aircraft lease agreement after failing to provide a good reason to have a court order set aside, or for delaying legal proceedings.

The case involved Kenyan company DAC Aviation, which had a lease agreement with AMRA Leasing Ltd.

The director of DAC was also the director of a Canadian company, which had provided a corporate guarantee to AMRA that DAC’s payment and performance obligations would be met.

The director also provided a personal guarantee.

Two aircraft were returned to AMRA between 2017 and 2019 but DAC had failed to pay rent and failed to keep them in good repair and condition.

The aircraft was not airworthy, which contravened the terms of the agreement. The director and the Canadian company had failed to pay the sums owed under the guarantees.

AMRA took legal action, claiming it was owed $11 million (around £8.2 million).

The director and his two companies indicated they intended to defend the claim and agreed to an extension of time for the service of the defence.

However, no defence was served and in March 2020, the court entered a default judgment ordering them to pay £8 million to AMRA.

AMRA applied to register the default judgment in Kenya. The Kenyan court ordered that the default judgment be paid in instalments.

Appealing the judgement

In August 2020, the director and his two companies appealed to the High Court to set aside the default judgment.

They didn’t pay the first instalment, which meant the full amount became due to be paid to AMRA.

In December 2020, they applied for a stay of execution of the default judgment.

Outcome of the courts decision

The court dismissed the application because the director of the two companies failed to prove there was a good reason the judgment should be set aside.

DAC was facing business difficulties in Kenya which were not helped by the impact of the COVID-19 pandemic on the aviation industry.

Their reasons for failing to serve a defence in time included that they were unable to fund the litigation because they were concentrating on saving their business.

However, while this was happening, they failed to apply for an extension of time or explain their financial constraints.

The court was not satisfied they had a good reason for allowing the proceedings to go by the wayside.

The director and the two companies had no strong defence, and so the default judgment was not to be set aside.

Please contact us for more information about the issues raised in this article or any aspect of contract law.

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