LONDON – Canadian aircraft manufacturer De Havilland may rightfully demand Indian low-cost carrier SpiceJet (SG) to pay US$42.9m in damages and terminate a purchase agreement it had agreed upon with the airline, a UK high court ruled in a contractual dispute between the two companies.
“De Havilland Canada confirms that it has received a judgment against SpiceJet from the High Court of Justice of England and Wales in the amount of US$42.9m. De Havilland Canada is pleased with the judgment. The decision confirms our position that SpiceJet did not abide by the terms of the contract in failing to accept delivery of aircraft and to make the required pre-delivery payments,” the airplane maker said.
The dispute between SG and De Havilland stemmed from disagreements over changes of purchasing terms in a deal SG had signed in 2017 with De Havilland to acquire 25 Dash 8-400 airplanes, Business Standard reported.
The Initially Agreed-Upon Terms And Conditions
As part of the initial purchase agreement, SpiceJet had to make pre-delivery payments for each airplane a certain number of months before that aircraft’s scheduled delivery, according to a statement from Brick Court Chambers.
If SG failed to pay the pre-delivery payments on time, De Havilland could then rightfully terminate the delivery of the concerned airplane as per the Liquidated Damages Provision of the pact, Brick Court Chambers stated.
And if De Havilland had to cancel the delivery of more than four airplanes because of this provision due to SG defaulting on payments, the manufacturer could terminate the entire agreement under the deal.
Payments That Never Came, Ammendment
Out of the planned 25 airplanes, SG took five airplane deliveries (1-5). However, it did not make pre-delivery payments for the fifteen remaining aircraft. SpiceJet also did not take the delivery of three (6-8) of the other planes, bringing itself to a dispute with De Havilland.
The agreement’s terms were then amended. Under the revised terms, De Havilland suspended the delivery of planes 9-25. How the amended terms affected the payments became the subject of the disagreement between SG and De Havilland.
De Havilland pointed out that only delivery dates were suspended. The suspension of delivery dates did not equate to an agreement suspending payment dates for those planes.
SpiceJet contested by arguing that its obligation to make those payments got suspended automatically by the deliveries being suspended, stating that it would not make “business sense” if it keeps paying when the deliveries were halted momentarily.
Agreement Terminated, Carrier Sued
De Havilland, in January, 2020 terminated the delivery of two batches of airplanes because of SpiceJet not making the related payments.
And later in February, 2020, De Havilland terminated the entire purchase agreement, having terminated the requisite four airplanes under the agreement to do that.
Then, De Havilland sued SpiceJet for damages. The ensuing court battles ended with this decision.
SpiceJet is reportedly planning on appealing the court’s judgment. “The same court allowed appeal against the order and we shall be doing the same within the timeframe provided by the court,” an airline spokesperson said Saturday, according to Business Standard.
Featured Image: SpiceJet VT-SQA Bombardier Dash 8-Q402. Alberto Cucini/Airways