Case Summaries

Singapore Airlines Ltd v CSDS Aircraft Sales & Leasing Inc [2021] SGHC(I) 3

SUPREME COURT OF SINGAPORE

14 June 2021

Case summary

Singapore Airlines Ltd v CSDS Aircraft Sales & Leasing Inc [2021] SGHC(I) 3

Singapore International Commercial Court Suit No 4 of 2019

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Decision of the Singapore International Commercial Court (delivered by Jeremy Lionel Cooke IJ):

Outcome: The Singapore International Commercial Court allowed the plaintiff’s claim of US$6.25m for breach of an Aircraft Purchase Agreement.

Background

1 On 19 July 2018, the defendant, CSDS Aircraft Sales & Leasing Inc (“CSDS”) made an offer to purchase an aircraft (“the Aircraft”) to the plaintiff, Singapore Airlines Ltd (“SIA”). SIA was based in Singapore while CSDS was based in California. The parties agreed on a purchase price of US$6.5m and CSDS paid an initial deposit of US$250,000 on 27 July 2018. On 24 August 2018, the parties agreed that the delivery date would be 15 September 2018 in Singapore with a ferry flight to Sanford Airport in Florida, where the engines were to be removed and shipped back to Singapore.

2 By 31 August 2018, the parties had agreed on the draft form of an Aircraft Purchase Agreement (“the Agreement”) but on 4 September 2018, CSDS informed SIA that it wished to add a “closing mechanism” into the Agreement. Among other things, CSDS requested SIA to send the original Bill of Sale to AEROtitle, as escrow agents, before the Aircraft was ferried to Sanford Airport. CSDS was to place the balance of the purchase price in escrow and this sum was to be released to SIA only when the Aircraft arrived at Sanford Airport. No agreement was reached between the parties on this closing mechanism. Subsequent discussions took place and SIA insisted on the confirmation of the transfer of funds by CSDS before the Bill of Sale reached AEROtitle and before SIA’s arrangement of the ferry flight of the Aircraft to Sanford Airport.

3 On 19 September 2018, CSDS sent the executed Agreement to SIA and proposed a new schedule which involved a further delay of two weeks. It was agreed that the end date of the ferry flight would be 10 October 2018.

4 The delivery date stipulated in cl 3.1 of the Agreement was 15 September 2018, which had already passed by the time CSDS signed the Agreement. However, cl 3.1 also provided that the delivery date could be “a mutually agreed date”. There were also, among others, two conditions precedent (“the conditions precedent”) to SIA’s obligation to deliver the Aircraft stipulated in cl 4:

(a) The payment of the purchase price or confirmation of its release; and

(b) The appointment of a process agent in England.

5 Subsequent delays occurred and CSDS sought multiple extensions of time to make payment. By 19 October 2018, CSDS had failed to make payment on at least six occasions despite assurances made to SIA and nine reminders made by SIA. As a result, the ferry date was changed multiple times due to the lead time required to make the necessary arrangements for the flight after the precondition of transfer of funds had been satisfied. Neither of the two conditions precedent were eventually satisfied by CSDS. During this period, CSDS had also repeatedly insisted that SIA place the original Bill of Sale in escrow with AEROtitle before it would make payment.

6 On 23 October 2018, SIA sent a letter of demand to CSDS for payment of US$6.25m, being the balance of the purchase price, by 5.00pm on 26 October 2018. CSDS again insisted on the original Bill of Sale being placed in escrow. It later came to light that CSDS’ financiers insisted on the original Bill of Sale being placed in escrow before providing any funds to CSDS.

7 On 26 October 2018, the parties agreed that SIA would send the Bill of Sale to AEROtitle that day and CSDS would transfer the funds that night, at the opening of the US day, with confirmation of such payment by close of business 26 October 2018 in the USA. However, no confirmation was given by CSDS by the stipulated deadline. AEROtitle eventually received the Bill of Sale by 31 October 2018. On 29 October 2018, CSDS demanded the return of the initial deposit it had paid and stated that SIA’s failure to place the Bill of Sale in escrow prevented CSDS from completing the purchase of the Aircraft. CSDS also threatened legal action if the deposit was not refunded within 72 hours.

8 On 31 October 2018, SIA commenced proceedings in the Singapore High Court and in the Writ of Summons (“the Writ”) and Statement of Claim (“the SOC”), sought specific performance of the Agreement and payment of US$6.25m. In the alternative, SIA claimed damages. On 1 November 2018, CSDS’ counsel indicated to SIA that CSDS was still willing to close the transaction provided that a time extension was given. SIA gave CSDS until 2 November 2018 noon to accept its proposed terms, which included proof of payment by 2 November 2018 noon. The proposal was not accepted and no payment was made.

9 The Singapore proceedings were served on CSDS’ president and counsel on 2 November 2018. CSDS’ counsel responded: “CSDS will perform as per the court filing”. However, no payment was made, and a letter of termination was sent by SIA on 4 November 2018.

10 On 5 November 2018, SIA amended the Writ and SOC to plead SIA’s acceptance of CSDS’ repudiatory breach, deleting its claim for specific performance and seeking damages alone on the basis of CSDS’ repudiation in failing to pay the US$6.25m. There was subsequent correspondence between SIA and CSDS and on 7 November 2018, SIA’s counsel replied to CSDS’ counsel making it clear that the contract was at an end and referenced the termination letter of 4 November 2018 and the amended Writ and SOC. On 14 December 2018, SIA served the default judgment obtained at the end of November. The proceedings were transferred to the Singapore International Commercial Court (“SICC”) on 13 August 2019.

11 Before the SICC, SIA claimed damages for breach of contract, In its defence, CSDS relied primarily on the decision in The Public Trustee v Pearlberg [1940] 2 KB 1 (“Pearlberg”) to argue that SIA, in bringing and serving proceedings claiming specific performance, had unequivocally elected to affirm the Agreement, with the result that the alleged prior breaches of contract by CSDS were waived or spent. CSDS also counterclaimed against SIA for wrongful repudiation of the Agreement.

The court's decision

12 The court found that there is no overriding substantive rule of law which arises out of the Pearlberg decision: at [79].

13 The court found that CSDS was in breach of the Agreement by failing to pay the purchase price on the last agreed date for payment on 26 October 2018. SIA was thus entitled to terminate the Agreement both as a matter of contract and as a matter of common law: at [96] and [102].

14 The court found that SIA had lawfully terminated the Agreement on 4 November 2018 and was entitled to damages for breach of contract. CSDS’ counterclaim was therefore dismissed: at [107].

The effect of the "rule" in Pearlberg

15 The court found that Pearlberg turned upon questions of Chancery practice. There is no overriding substantive rule of law which arises out of the Pearlberg decision. The “rule” in Pearlberg was only procedural and suspensory in nature: at [70], [79] and [89].

16 The court found that Pearlberg made it clear that it is open to a party to discontinue its claim for specific performance and pursue a claim for termination and damages if the breach is persisted in. Pearlberg also made it clear that the effect of bringing and serving a claim for specific performance is only to suspend the right to terminate: at [93].

17 Based on various English and Australian authorities referencing Pearlberg, there is no absolute rule that a party cannot terminate, even whilst it has a claim for specific performance before the court because a continued breach, a fresh breach or a refusal to comply with contractual obligations may all constitute further repudiatory conduct following the initiation of the proceedings: at [94].

18 Accordingly, the court found that there was no irrevocable election made by SIA when it served the proceedings on CSDS claiming specific performance and damages in the alternative. SIA was not electing to affirm the contract, but was leaving its options open to terminate and claim damages: at [88] and [92].

Breach of contract by CSDS

19 The court found that CSDS was not justified contractually to demand that SIA place the original Bill of Sale in escrow before making payment: at [33].

20 The court found that CSDS did not fulfil the two conditions precedent. The obligation of SIA to deliver the Aircraft and the Bill of Sale therefore never arose: at [42].

21 The court found that CSDS was in breach of the Agreement by failing to pay the purchase price on the last agreed date for payment on 26 October 2018. There was no subsequent extension of time for payment given. The continuing failure to pay constituted a breach of contract throughout the period when the claim for specific performance was being pursued and before its abandonment. SIA therefore lawfully terminated the Agreement by its 4 November 2018 letter: at [96] to [97].

22 Even if Pearlberg suspended the right to terminate:

(a) SIA lawfully terminated the Agreement on the basis of continuing breaches of non-payment by its service of the amended proceedings on 5 November 2018: at [97].

(b) There was also a fresh breach by CSDS in refusing to make payment after the amended Writ and SOC were served, which SIA accepted on 7 November 2018 or alternatively, 14 December 2018: at [98].

23 The court found that because of CSDS’ repudiatory breach, it was not strictly necessary for SIA to rely on cl 16.1(a) of the Agreement, which required the expiry of a five business day period after notice from SIA was given, as an Event of Default which would justify termination. Clause 16.2 preserved SIA’s rights at common law. In any event, the requirement in cl 16.1(a) was satisfied when the 4 November 2018 letter of termination and the 7 November 2018 confirmatory letter of termination were sent: at [99].

24 The court stated that the question of whether CSDS could be refunded its initial deposit would be determined during the assessment of damages: at [105].

 

This summary is provided to assist in the understanding of the Court’s grounds of decision. It is not intended to be a substitute for the reasons of the Court. All numbers in bold font and square brackets refer to the corresponding paragraph numbers in the Court’s grounds of decision.

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