Blue Sky One Ltd & Ors v Mahan Air & Anor (Rev 1)

Blue Sky One Ltd & Ors v Mahan Air & Anor (Rev 1)

The claimants are entitled to the market value of the three converted aircraft as at 16 October 2008, and mesne profits at US$795,000 per aircraft per month from 16 October 2008 until delivery up or payment. The option agreement did not reduce market value. The mortgage over the second aircraft is valid under English law; the mortgage over the third aircraft is invalid under Dutch law. Renvoi does not apply. The defendants’ counterclaim is stayed as a sanction for contempt. Frustration is not established as US sanctions were foreseeable. Consequential loss claims fail for lack of proof and failure to mitigate.

Parties
Claimant: Blue Sky One Limited; Claimant: Blue Sky Two Limited; Claimant: Blue Sky Three Limited; Defendant: Blue Sky Airways LLC; Defendant: Mahan Air; Defendant: Blue Sky Aviation Co. FZE; Third Party: Balli Group PLC; Third Party: Crypton Limited; Third Party: Blue Sky Six Limited; Third Party: Blue Sky Four Limited; Third Party: Blue Sky Five Limited; Claimant: PK Airfinance US Inc
Jurisdiction
England and Wales
Judgment Date
25 March 2010
Procedural Posture
Commercial Dispute (conversion, Breach of Contract, Mortgage Validity) / Judgment After Split Trial (phase 2 – Quantum, Set Off, Account, and Direct Claim)
Outcome
Judgment for claimants (Balli parties and PK Airfinance) in part; counterclaim stayed as sanction for contempt; consequential loss claims dismissed; PK’s direct claim on third aircraft dismissed.
Legal Topics
Conversion, Damages, Mesne Profits, Set Off, Mortgage Validity, Conflict of Laws, Frustration, Breach of Contract, Sanctions, Aircraft Finance
Commercial Law Private International Law Contract Law Tort Law Conversion Damages Mesne Profits Set Off +6 more

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Parties

Blue Sky One Limited

Claimant

Blue Sky Two Limited

Claimant

Blue Sky Three Limited

Claimant

Blue Sky Airways LLC

Defendant

Mahan Air

Defendant

Blue Sky Aviation Co. FZE

Defendant

Balli Group PLC

Third Party

Crypton Limited

Third Party

Blue Sky Six Limited

Third Party

Blue Sky Four Limited

Third Party

Blue Sky Five Limited

Third Party

PK Airfinance US Inc

Claimant

Procedural Posture

Commercial Dispute (conversion, Breach of Contract, Mortgage Validity) / Judgment After Split Trial (phase 2 – Quantum, Set Off, Account, and Direct Claim)

Legal Issues

  1. 1 Measure of damages for conversion of aircraft
  2. 2 Effect of mortgages and set-off on damages
  3. 3 Validity of aircraft mortgages under foreign law (English, Armenian, Dutch, Iranian)

Ratio Decidendi

The claimants are entitled to the market value of the three converted aircraft as at 16 October 2008, and mesne profits at US$795,000 per aircraft per month from 16 October 2008 until delivery up or payment. The option agreement did not reduce market value. The mortgage over the second aircraft is valid under English law; the mortgage over the third aircraft is invalid under Dutch law. Renvoi does not apply. The defendants’ counterclaim is stayed as a sanction for contempt. Frustration is not established as US sanctions were foreseeable. Consequential loss claims fail for lack of proof and failure to mitigate.

Court Disposition

Judgment for claimants (Balli parties and PK Airfinance) in part; counterclaim stayed as sanction for contempt; consequential loss claims dismissed; PK’s direct claim on third aircraft dismissed.

Orders

  • Defendants to deliver up the three Package 1 aircraft or pay market value as at 16 October 2008 (US$35.542m, US$35.397m, US$43.630m)
  • Defendants to pay mesne profits/user damages at US$795,000 per aircraft per month from 16 October 2008 until delivery up or payment