Shilmore Enterprises Corp & Anor v Phoenix 1 Aviation Ltd

Introduction

The first claimant, Shilmore Enterprises Corporation ("Shilmore"), is or was the owner of a Canadair Challenger aircraft, registration D-AAMA, registered in Germany ("the aircraft"). It is an executive jet with an extended range facility. Shilmore's case is that it transferred the aircraft to the second claimant, New World Enterprises Corporation ("New World"), by a transfer agreement dated 21st December 2007. The defendant, Phoenix 1 Aviation Limited ("Phoenix"), claim to have a subsisting option to purchase the aircraft until June 2008 pursuant to an agreement known as the Heads of Terms ("HoT").

On 28th December 2007 the claimants sought and obtained an injunction against Phoenix in respect of the aircraft. The material part of the order made by Teare J is in these terms:

The aircraft was in the Seychelles, having been flown there by Phoenix just before Christmas in circumstances which I will explain in a little more detail later in this judgment. On 17th January 2008 Silber J varied the order "but only so as to facilitate the return of the aircraft to Cologne in Germany". The order made by the judge on that occasion required a considerable amount of co-operation between the claimants and Phoenix to ensure that the aircraft was returned to Germany. Unhappily, in breach of the order, that co-operation was not forthcoming and the aircraft presently remains in the Seychelles.

Also on 17th January, the judge fixed the hearing date of the claimants' application pursuant to CPR Part 25.1(1)(c)(i) and/or Part 25.1(1)(a) for an order that they have custody of the aircraft and that "the defendant do forthwith deliver into the custody of the claimants and surrender possession of the said aircraft". It is that application with which this judgment is concerned.

There is a good deal of authority as to the relevant principles that apply to the exercise the court's discretion in granting or refusing an interlocutory injunction. It is unnecessary to refer to very many of them here. In summary:

There are particular factors that must be considered where, as here, what is sought is a mandatory injunction. In Shepherd Homes Limited v. Sandham [1971] Ch 340, Megarry J observed that, in respect of an interlocutory application for a mandatory injunction, "the seriousness of such an order remains as an important factor" in the exercise of the court's discretion, because it required the taking of positive steps which would result in a consequent waste of time and money if the injunction turned out to have been wrongly granted. When he addressed this decision in Films Rover Hoffmann J noted that:

I consider that the principles to be applied in an interlocutory application for a mandatory injunction are those summarized by Chadwick J in Nottingham Building Society v. Euro Dynamics Systems Plc [1993] FSR 468 at 474, which were subsequently endorsed by Phillips LJ in Zockoll Group Limited v. Mercury Communications Limited [1998] 1 FSR 354. They were as follows:

I set out the relevant facts in this case at sections C to G below before considering the claimants' application by reference to these principles of law at sections H to K below.

The aircraft has been operated since 2006 by a company known as JetAir, a owned by Mr. El Jaouni, a Lebanese businessman. In 2007 another company owned by Mr. El Jaouni, Phoenix, expressed the desire to lease the aircraft from Shilmore and possibly to purchase the aircraft for themselves.

In June 2007 Shilmore and Phoenix reached an agreement in principle to the effect that Phoenix would lease the aircraft for a year, from 8th June 2007 to 7th June 2008. This agreement in principle was set out in a document dated 18th June 2007 and called Heads of Terms ("HoT"). Although clause 9(2) of the HoT said that the terms were "subject to contract and shall not constitute a legally binding contract", it appears that both parties treated the document as having legal force and effect and neither side took any point before me that the HoT was anything other than a legally binding contract.

After the introductory words, the first part of the HoT was headed ‘Terms of the Proposed Lease’. It identified the term of one year noted above, and the monthly payments to be made by Phoenix of US$140,000. Clause 1.3 provided that Phoenix were liable for all costs associated with the aircraft in the following terms:

Clause 1.4, which is important for reasons which will become apparent later, provided that:

The second part of the HOT of terms was headed "Terms of Proposed Option". Clauses 2.1 to 2.3 provided as follows:

Clause 2.4 is important. It provided that:

It seems to me clear that, on the express wording of the HoT, there was one singular option to purchase to be exercised by Phoenix at the end of the term, unless the process was accelerated in the manner set out in clause 2.4. It was called 'The Proposed Option' in the introductory paragraph of the letter. I reject the submission made by Mr. Shah on behalf of Phoenix that there were in fact two different options and that, if the option under clause 2.4 was exercised but did not lead to a sale to Phoenix, they had another option to purchase the aircraft at the end of the term. There may, of course, have been further negotiations but, in such circumstances, there would be no further entitlement to an option on the part of Phoenix.

There were other provisions of the HoT dealing with the condition of the aircraft itself. Clause 7 was in the form of a warranty in relation to the condition of the aircraft and, in particular, was a warranty that it had been recently subject to its 60-month major inspection. Clause 8 was a term by which Shilmore allowed Phoenix ‘to conduct a due diligence’ on the aircraft's files and records during the preparation of the full lease which the HoT anticipated would be proposed and executed by both parties.

Some time in August Shilmore's solicitors, Davenport Lyons, sent Phoenix's then lawyers, Alem & Associates, the proposed aircraft operating lease agreement. This was, of course, designed to replace the HoT. There was, however, no substantive response to the proposed lease. Much more recently Phoenix's new solicitor, Ms. Matthews of Shadbolt & Co., has suggested that this was because no typical pre-delivery or pre-buy inspections had taken place. However, it is right to note that, in the contemporaneous documents, there was no suggestion that this was the reason for the absence of any response to the draft lease by Phoenix. However, by early September the lease had been overtaken by other events.

Under clause 2.4 of the HoT the option could not be exercised any earlier than 7th September 2007. Even then, the process could start only when Shilmore had informed Phoenix of the existence of negotiations with a third party. It is Shilmore's case that they did that in a telephone conversation on about 7th or 8th September 2007. Although Phoenix disagree that there was any reference to negotiations with a third party during this conversation, they do accept that the possibility of their purchasing the aircraft was raised on the 8th or 9th September and, moreover, they expressed their desire so to do.

This is borne out by Mr. Alem's e-mail of 10th September to his opposite number, Mr. Hatchwell, at Davenport Lyons. There he said:

The subsequent process of negotiating the sale of the aircraft to Phoenix took much longer than expected. However, it appears that Shilmore were in no doubt that the process on which they were engaged had been triggered by the exercise of Phoenix's option under the HoT. Indeed, Mr. Hatchwell spelt that out in an e-mail of 21st November 2007 in which he was expressing his concerns about the delays by Phoenix. He said:

Mr. Alem's response was, in my judgment, also consistent with the exercise of the option arising under the HoT. He said:

If there was any doubt about whether or not Phoenix were exercising (or endeavouring to exercise) their option under the HoT, that was dispelled by the terms of the sale and purchase agreement ("SPA") which was eventually executed on 14th December 2006. Recital B of the SPA said:

The unambiguous words of the recital reinforce my conclusion that Phoenix had one option to purchase under the HoT, not multiple options, and had chosen to exercise that option in the process that had led up to the execution of the SPA.

That conclusion is further confirmed by the express provisions of clauses 2.2 and 2.3 of the SPA. It is necessary to set those provisions out in full:

In my judgment, these provisions are relevant to the present application for three reasons. First, clause 2.2 is expressly designed to be read with clause 2.4 of the HoT. The latter had identified a 45-day period which had been exceeded; the former waived Phoenix's failure to comply with that period. Secondly, the introductory words of the clause made clear that the HoT would continue to subsist unless overridden by the terms of the SPA. That was also confirmed by the express words of clause 7.1 of the SPA. Thus, the SPA was the dominant document.

Thirdly, that part of clause 2.3 dealing with the consequences of termination addresses what would happen to the sinking fund referred to in clause 1.4 of the HoT in circumstances where the SPA was terminated. Under the HoT Phoenix only got back any residue in the sinking fund if they had exercised and successfully completed their option to purchase. If the SPA was terminated then clause 2.3 recognized that the option would have been exercised but not successfully completed, and it amended clause 1.4 of the HoT to provide that, in such circumstances, any residue would be paid to Phoenix in any event. This further demonstrates that the SPA saw the proposed option as a once-only event which, if it was exercised unsuccessfully, thereby bringing about the termination of the SPA, would mean that Phoenix had no further option to purchase. The amendment of clause 1.4 thus made the distribution of the sinking fund fairer in those particular circumstances.

In the large amount of material raised by Phoenix in defence of this application, it has been suggested that, prior to signing the SPA, Phoenix were concerned about the maintenance and condition of the aircraft. I am bound to say that this concern is not borne out by the correspondence in October and November 2007. On 11th December Alem Associates raised a point on the wording of the SPA, and the need to ensure that the agreement differentiated between ordinary maintenance and work that was caused as a result of a breach of warranty. Certain provisions were added to the SPA to deal with this legitimate point. However, contrary to Mr. Shah's submissions, I do not accept that these e-mails come close to suggesting that Phoenix considered that at that time they had an existing claim for breach of a warranty of clause 7 of the HoT. No such suggestion is made in this e-mail or at any time prior to the execution (and almost immediate termination) of the SPA.

I should make one other point about the lead-up to, and terms of, the SPA. It is Phoenix's case now that, although they failed to exercise the option, which failure caused the termination of the SPA, they still have a second option to purchase the aircraft at the end of the term pursuant to clauses 2.1 to 2.3 of the HoT. It is again right to note that, at no time prior to the termination of the SPA, was such a suggestion ever made, and no such entitlement is expressed in anything like clear terms in the SPA itself.

As I have noted, the SPA was executed on Friday, 14th December 2007. The deposit of US$500,000 had to be paid within 24 hours. It was not. Various excuses for non-payment were offered, including a religious holiday in Lebanon. At one point Shilmore were told that Mr. El Jaouni had indeed issued instructions for the deposit to be paid. At 1.30pm on 18th December 2007 Mr. El Jaouni informed Mr. Elliott in a telephone conversation that he was not prepared to pay the deposit for reasons which were largely connected with the alleged condition of the aircraft. On 19th December Mr. Alem e-mailed Mr. Elliott at Davenport Lyons seeking his agreement to change the deposit into a refundable deposit and to seek an independent inspection report on the aircraft.

Davenport Lyons took instructions from Shilmore on this changed stance and, at 6.40pm on 19th December, they e-mailed Mr. Alem to say that the changes and the delay were unacceptable and that in such circumstances "the deal is off".

On 21st December 2007 Davenport Lyons sent a formal letter of termination to Phoenix. The reply, which was sent on 24th December 2007, suggested (wrongly) that the SPA was only a draft and attempted to justify (again wrongly) the non-payment of the deposit by reference to alleged concerns about the condition of the aircraft. The reply from Phoenix omitted to make any mention of the fact that, two days earlier on 22nd December, the aircraft had been released from the RUAG facility and approved for flight, and had then been flown by Phoenix first to South Africa and then to the Seychelles.

Although a number of arguments were advanced in the contemporaneous correspondence to try and justify the failure to pay the deposit, Mr. Shah realistically accepts before me that the failure to pay was a clear breach by Phoenix of the SPA, and brought about its termination. One of the consequences of that termination was the transfer of the aircraft for US$10 from Shilmore to New World, a separate company but one in common ownership.

Following the transfer, also on 21st December, Davenport Lyons sent an e-mail to the RUAG aerodrome which was, as I have said, dealing with the maintenance of the aircraft. That e-mail notified them that the aircraft was grounded until further notice. A copy of the grounding letter had also been sent to Phoenix with the formal letter of termination referred to at paragraph 31 above.

For reasons which have not been properly explained, these letters were ignored because, the following day, the aircraft was flown to the Seychelles. Unsurprisingly, this caused considerable consternation in the claimants' camp. On 24th December Davenport Lyons e-mailed Mr. Alem in the following terms:

Mr. Alem's reply of 24th December 2007 took the point that the claimants had no right to terminate the HoT with Phoenix. He went on:

On 28th December the claimants obtained the injunction referred to above varied by Silber J on 17th January. That varied order has not been complied with because the aircraft remains in the Seychelles. From my reading of the relevant witness statements it seems to me that both sides can be criticized for failing to cooperate, and in particular in making the objections that each made to the captain proposed by the other. The parties' failure to comply with the order, which was heavily reliant upon a large degree of co-operation between them, does not provide any reassurance to the court that joint custody of this aircraft is a viable proposition.

The first issue for me to consider is which of the different courses being advocated by the parties is likely to involve the least risk of injustice if it turns out to be ‘wrong’ in the sense identified by Lord Hoffmann in Films Rover. In order to do that, it is necessary to spell out plainly what each side is actually asking me to do.

On behalf of the claimants, Mr. Spearman QC urges me to give the claimants custody and possession of the aircraft so that it can be used by its rightful owners. He submits that, if he is wrong and at trial there is no entitlement to possession or custody, then Phoenix can be compensated in damages. That is, he says, the overwhelming likelihood given that: (a) by the time of any trial the one year term in the HoT will have expired anyway; (b) if, which he vehemently disputes, Phoenix have any sort of residual option to purchase, the court would not grant specific performance. One reason for that is because the aircraft is not a chattel of special uniqueness or rarity. Again, therefore, he says damages would be an adequate remedy.

On that point Mr. Shah suggested that specific performance might be appropriate because the aircraft was of particular value, in particular because it was an executive jet with an enhanced range capacity. However, there was nothing to indicate in the evidence that such a jet was particularly unusual, let alone unique, and nothing to say that this facility could not be added by way of modification to other executive jets. I do not, therefore, think there is anything in that point.

Much more importantly, I consider that specific performance is most unlikely to be sought by Phoenix, let alone granted by the court, at any subsequent trial, even assuming that Phoenix are able to establish a subsisting option to purchase. There is no nothing to suggest that Phoenix could or would exercise any such residual option. After all, they signed an agreement to purchase the aircraft as recently as 14th December, and then wholly failed to comply with the terms of that agreement, knowing that their non-compliance would terminate the SPA. They continue to insist that the aircraft is in a much worse condition than they had been led to expect. Even now, there is no commitment from Phoenix that they would exercise any residual option to purchase. Moreover, even if there were such a commitment, given the lack of trust between the parties, the lack of anything unique about the aircraft and the fact that Phoenix had the opportunity to purchase the aircraft and deliberately did not do so, in my judgment, a court would conclude that any claim for specific performance should be roundly rejected. Realistically, it would be a nonsense for me to conclude, only a month after Phoenix decided not to buy the aircraft, that they had a reasonable prospect of persuading a court to grant an order for specific performance of that very same option.

I therefore accept Mr. Spearman QC's submissions. On the evidence I conclude that, if I granted the order sought by the claimants, Phoenix's losses would be measured in purely financial terms. I would, of course, need to make sure that proper undertakings were in place to protect Phoenix from the claimants' potential inability to pay any such sums, particularly given that they are both Marshall Island companies. I deal with that in section K below.

Phoenix's position is rather unusual. They do not seek to set aside the injunction granted by Teare J. Therefore, they seek an order whereby the aircraft remains in the joint custody of the parties, but is prevented from operating or flying, staying in a sort of sterilized limbo. As a fallback, they accept that the claimants might be given sole custody of the aircraft but they still say that the aircraft should remain sterilized.

I have to say that, like Silber J before me, I find such a course of itself an unattractive option. That would render useless an asset capable at present of generating rental of US$140,000 a month, at least until the completion of the trial or possibly an appeal. That strikes me as an option which I ought to regard very much as a last resort.

If I refused the order sought, the claimants would be kept out of the use and enjoyment of their own aircraft. As I have said, that might last for some considerable time because it is most unlikely that any trial could be heard until May or June at the earliest, and there is thereafter the possibility of an appeal. In the meantime, it would be in the joint custody of two parties who have not co-operated in the past and I have every reason to believe will not cooperate in the future. On this scenario a valuable asset would simply be depreciating to no good purpose.

In addition Mr. Spearman QC contends that there is nothing to indicate that, if I refused the order and it turned ought to be the wrong result, Phoenix would be able to pay the damages that would then flow. I consider that that submission is well-founded. Phoenix have given no indication of any cross undertakings. They have failed to pay the rent for November and part of December, and have not paid any of the costs under clause 1.3 of the HoT. That is an accrued liability of about US$300,000. In addition, of course, they did not pay the deposit set out in the SPA.

So, on the one hand, I am being asked to keep the aircraft sterilized and out of action, in the joint custody of two warring parties, one of which has had an option to purchase the aircraft as recently as last month and has deliberately failed to do so; and, on the other, I am being asked to accept a proposal whereby the aircraft is returned to its owners, together with the provision by those owners of appropriate financial undertakings to ensure that the other side will be properly compensated if my order turned out to be wrong.

In those circumstances I am in no doubt that the least risk of injustice would arise were I to grant the order sought. That is so despite the fact that it is, in effect, a mandatory, rather than a prohibitory, injunction that is being sought.

For the reasons set out above, I am inclined to accept the submission made on behalf of the claimants that, because of the risk of injustice if the order they sought was refused, this significantly outweighs the risk of injustice, even if it transpires that the order should not have been granted. Therefore the fourth point made by Chadwick J in Nottingham is also relevant in the present case. That would mean that it would not matter whether or not I felt a high degree of assurance that Phoenix had unsuccessfully exercised their once-only option to purchase, and had no subsisting option. However, for the reasons which I set out below, I have concluded that I can feel a high degree of assurance that Phoenix have unsuccessfully exercised their option and are not now entitled to do so again.

For the reasons which I have already explained at paragraph 14, I have concluded that the HoT offered Phoenix one option to purchase the aircraft. They exercised that option as recorded, amongst other places, in the recital to the SPA. In order to get round the fundamental difficulty that this creates for Phoenix, Mr. Shah is obliged to argue that the recital was wrong. However, as I debated with him yesterday, I am unable to accept that submission. The SPA was the product of weeks of painstaking negotiations between lawyers and their clients. There is no evidence from those involved in those negotiations on the side of Phoenix to the effect that the recital was wrong or, if it was, how such an error came to be made. I am left with the impression that the recital is now said to be wrong because, if it were not, it provides a potentially fatal blow to the case that Phoenix wish to run before me.

In any event I consider that clauses 2.2 and 2.3 of the SPA only make sense when set against the background recorded in that recital, namely that Phoenix had exercised its one option under the HoT. As I note at paragraph 26 above, the provisions in clause 2.3, which deal with the parties' rights and liabilities if the SPA was terminated and the aircraft was not sold on, recognize that Phoenix had no further option which they could exercise and therefore instead amended clause 1.4.2 of the HoT.

Phoenix were in admitted breach of the SPA, thereby terminating that agreement. Their option had been unsuccessfully exercised and Shilmore were entitled either to continue to operate the HoT until the end of its term, or sell or transfer the aircraft to another company. The countervailing argument, that Phoenix had a separate option to purchase under clauses 2.1 to 2.3 of the HoT faces, in my judgment, two insurmountable hurdles.

First, it requires a finding of there being two separate options under the HoT, an argument which I have rejected for the reasons set out above. Secondly, it would mean that Phoenix would be taking advantage of (or at the very least ignoring) their own breach of the SPA and its termination in order to exercise their option in May 2008; they would be acting as if the SPA, their breach of the SPA and its termination had simply never happened. I again consider that argument to be unsustainable.

It is convenient here to deal with Mr. Shah's contention that, in this case, Phoenix would be able to persuade the judge at the trial to grant relief from forfeiture, and that the court would allow Phoenix further time to pay the deposit and purchase the aircraft. In making those submissions he relied on paragraphs 26-128 to 26-130 of Chitty on Contracts 29th Edition and, amongst others, the House of Lords decision in On Demand Information PLC v. Michael Gerson Finance PLC [2003] 1 AC 368.

Attractively though this point was argued by Mr. Shah, I cannot accept it. The cases demonstrate that relief from forfeiture, being an equitable jurisdiction, is only granted in circumstances where justice and equity demand that a party who paid for a chattel in instalments and then, often through no fault of its own, failed to pay the final instalment, should not in those circumstances be deprived of the item in question. I am doubtful as to whether in this case the monthly payments can be regarded as instalments, given that they were primarily the rental for the aircraft. Even assuming that they were instalments, the crucial point is that, in my judgment, no court would grant Phoenix relief from forfeiture in circumstances where, as here: (a) Phoenix had agreed to buy the aircraft; (b) Phoenix had agreed to pay the deposit within 24 hours; (c) Phoenix asserted and continues to assert that they had the money to pay the sum due and (d) Phoenix deliberately chose not to pay the deposit knowing that that would terminate the SPA.

It seems to me that for those reasons Mr. Spearman QC is right to say that this case is a very long way from the limited category of cases in which relief from forfeiture has been granted by the courts. In my judgment on the facts here it simply would never arise.

For these reasons I conclude that I can have a high degree of assurance that Phoenix had unsuccessfully exercised their single option to purchase the aircraft and are not now entitled to any further opportunity.

For completeness I should say that there are a number of other factors to which I have also had regard, and which lead me to conclude that, in any event, it is appropriate to exercise my discretion in favour of the claimants. I deal briefly with each of those matters below.

First, I am bound to note that Phoenix's case on a variety of matters has changed radically over the course of the last few months. I have explained some of those changes above. Often their position has been inconsistent, and I am left with the impression that, certainly in the past, they and their advisers have said whatever fitted the needs of the moment.

I am in no doubt that their recent change of lawyers has led to a much more realistic appraisal of Phoenix's position. I make plain that I make no criticism of anything in Ms. Matthews' statement, or anything that was submitted to me by Mr. Shah, but the material in the statement does give rise to a second factor. Obviously through no fault of her own, Ms. Matthews' lengthy statement cannot be based on her own personal knowledge. She was not involved in any of the key events, unlike Mr. Elliott of Davenport Lyons. Thus, the statement has to rely entirely on the input of others, and very often the source of the particular information relied on is not identified at all, or is identified simply as ‘Phoenix’. I have to note that, to my surprise, there is no evidence at all from Mr. Alem.

Thirdly, as Mr. Shah properly accepted, there was no proper explanation, even now, of why the deposit was not paid, given the express terms of the SPA. It is, I think, a curious course to take: to execute a formal contract one day and then deliberately fail to do what the contract required the next day, so that it immediately terminated. The lack of an explanation for that is striking.

Fourthly, and on a related point, there is no proper explanation of how and why the notices and letters of 21st December were ignored and how and why Phoenix flew the aircraft to the Seychelles in the way that they did. The fact that Mr. Alem could write with such righteous anger on 24th December 2007 in the letter that I have quoted, without mentioning the fact that, contrary to the notices, the aircraft was on the other side of the world, is striking to say the least. Moreover, the only explanation provided at all was that set out in Ms. Matthews' statement on 22nd January 2007 at paragraph 111. There she says:

This is, with respect, unilluminating. It suggests that the notices were deliberately ignored and the aircraft flown secretly out of Germany. It is difficult not to conclude that the lack of a proper explanation from Phoenix themselves is deliberate, and that on 21st or 22nd December they chose to ignore entirely the consequences of their breach of the SPA.

Fifthly, much of the material provided by Phoenix for the purposes of this application relates to the complaints about defects. It is again striking that all of those complaints were known by 14th December 2007, but Phoenix still chose to enter into the SPA. In addition, the allegations are very generalised assertions, and there is no expert or other independent evidence from a maintenance engineer to suggest that the maintenance costs incurred, for which under the HoT Phoenix are prima facie liable, were anything out of the ordinary.

Finally, I should make the point to which I have already alluded, namely that, although there was a failure to comply with the order of Silber J, I do not think that blame can be laid at one particular party's door. It seems to me that that was a lack of co-operation on both sides which, although I regret, does not seem to me to be a factor which I should take into account in making the order.

Accordingly, the five points to which I have referred at paragraphs 58 to 63 above add further confirmation to my view that I should exercise my discretion in favour of the claimants and grant the custody and possession order sought.

I have also concluded that, as part of the terms of the order I make, I should increase the security of US$100,000 currently provided by the claimants and paid into court. The method of arriving at the increased figure is by its very nature a rough and ready calculation. It is, of course, not to be taken as either an endorsement or a rejection of the underlying claims. It is simply a method by which an appropriate figure can be identified.

There is a claim by Phoenix for US$616,000 in respect of maintenance costs. The suggestion is that these costs, or at least the majority of them, have been incurred because of Shilmore's breach of the warranty at clause 7 of the HoT. As I have said, the claim is very general and the figures are unparticularised. It seems to me that I ought to give Phoenix some protection in relation to this claim, and that is so whatever the position as to whether these sums have been spent, or merely a liability incurred in respect of them. I would therefore propose in my calculations to allow US$400,000 for the purposes of the security exercise.

Phoenix also make a claim that, because the aircraft was defective, the monthly payments were too high and should have been US$40,000 a month less. That argument seems to me to be fatally flawed. First, Phoenix cannot be entitled to a reduction in the rent that they freely agreed to pay. Second, if the costs which Phoenix incurred to put the aircraft into the condition in which it should have been in June 2007 are properly due under the warranty, then those costs have already been allowed for in the claim for maintenance costs referred to above. There can be no further claim in relation to the rental.

There is also a claim for the lost instalments. Five monthly payments of US$140,000, a total of US$700,000, were made by Phoenix. 85% of that would have gone towards the purchase price and Mr. Shah therefore submits that Phoenix would have a claim for US$595,000.

I consider that that claim is also flawed as a matter of principle. The monthly payments were rental, not simply instalments. In addition, Phoenix had the opportunity to buy the aircraft and chose not to.

Essentially this is a claim for the lost opportunity of being able to buy the aircraft. If there was such a claim, and obviously for the reasons I have previously given I do not believe that there is, it would be, as a matter of causation and quantum, the difference between the price that Phoenix would have paid for it under their arrangements with Shilmore, and the market cost of a similar plane, if that market cost was higher. Mr. Spearman QC points out that there is no evidence to say that the market cost would have been more. However, in all the circumstances I consider that it is not unreasonable to assume that it may have been a little more. However, I am not prepared to allow more than US$250,000 in relation to that head of claim on the basis of the information presently before me.

Thus, on the material presently available, I would consider that Phoenix may have a claim worth around US$650,000. Against that must be set the unpaid monthly payments after November and part of December and the costs under clause 1.3 of the HOT due to Shilmore, a total of around US$300,000. That would give rise to a security figure of US$350,000.

I do not for this purpose take into account the unpaid deposit. That is partly because the non-payment terminated the SPA, and there may be an argument that it was no longer payable in any event. It is also because the deposit was capable of being reduced or exhausted by claims for maintenance costs and the like under clause 3.5 of the SPA. In the circumstances, therefore, it does not seem to me that I should take it into account when arriving at the correct figure for security.

For these reasons I consider that, as a condition of my order, the US$100,000 in court should be increased by US$250,000 to a figure of US$350,000 in total.

I will hear counsel as to the precise terms of the order and all questions of costs.