Airline Placement Ltd v Revenue and Customs (VAT - Procurement of training for pilots - Whether "security bond" paid by trainee pilot was consideration for provision of training) [2025] UKFTT 894 (TC) (23 July 2025)

[ Home ] [ Databases ] [ World Law ] [ Multidatabase Search ] [ Help ] [ Feedback ] [ DONATE ] First-tier Tribunal (Tax) You are here: BAILII >> Databases >> First-tier Tribunal (Tax) >> Airline Placement Ltd v Revenue and Customs (VAT - Procurement of training for pilots - Whether "security bond" paid by trainee pilot was consideration for provision of training) [2025] UKFTT 894 (TC) (23 July 2025) URL: https://www.bailii.org/uk/cases/UKFTT/TC/2025/TC09595.html Cite as: [2025] UKFTT 894 (TC) [ New search ] [ Contents list ] [ Printable PDF version ] [ Help ] Neutral Citation: [2025] UKFTT 894 (TC) Case Number: TC09595 FIRST-TIER TRIBUNAL TAX CHAMBER Hybrid hearing at Taylor House, London Appeal reference: TC/2022/12528 VAT - Procurement of training for pilots - Whether "security bond" paid by trainee pilot was consideration for provision of training - Whether arrangements give rise to an 'abusive' result under Halifax principles - If the security bond is consideration for provision of training or Halifax abusive, whether (1) credit should be given for the output tax already accounted for; (2) the parties reached an agreement under s 85 Value Added Tax Act1994; and/or (3) the training that took place in New Zealand falls outside the scope of UK VAT - Appeal allowed in part Heard on: 3 - 5, 9, 11 & 12 June 2025 Judgment date: 23 July 2025 Before TRIBUNAL JUDGE BROOKS TRIBUNAL MEMBER AKHTAR Between AIRLINE PLACEMENT LIMITED Appellant and THE COMMISSIONERS FOR HIS MAJESTY'S REVENUE AND CUSTOMS Respondents Representation: For the Appellant: Nicola Shaw KC instructed by Macfarlanes LLP For the Respondents: Howard Watkinson of counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs DECISION Introduction 1. Between 2004 and 2020 the Appellant, Airline Placement Limited (" APL ") procured airline pilot training for trainee pilots (" cadets ") and placed qualified pilots with commercial airlines (" Sponsor Airlines ") in return for a "placement fee" equal to the cost of the cadets' training. As described in more detail below, the cadets were required to deposit a "security bond", equal to the cost of their training, with APL. On completion of their training and placement with a Sponsor Airline, APL would transfer the bond to the Sponsor Airline. APL accounted for VAT on the placement fees paid to it by the Sponsor Airlines but did not account for VAT on the security bonds deposited by cadets. 2. APL contends that the bonds deposited by cadets was security for the costs it incurred to ensure that the cadets would undertake and complete the training course and therefore not subject to VAT. 3. The Respondents (" HMRC "), by letter of 26 January 2021 (the " Decision Letter "), issued a decision stating that the security bond was "consideration for the supply of training" that the cadet "is due to receive or has received" and is either a standard rated supply and subject to VAT or an abusive arrangement under the principles set out in Halifax Plc v Customs and Excise Commissioners (C-255/02) with the same result. On 16 August 2021, HMRC issued APL with an assessment, under s 73 Value Added Tax Act 1994 (" VATA "), in the sum of £10,717,426 for its VAT periods from 03/17 to 12/20 inclusive (the " Relevant Period "). HMRC's decision and assessment were upheld on 21 April 2022 following a review. 4. On 20 May 2022 APL appealed to the Tribunal against HMRC's decision and assessment. It contends that on a proper contractual analysis the economic reality of the arrangements was that APL made taxable supplies of trained cadets to the Sponsor Airlines rather than taxable supplies of training to the cadets. Alternatively, APL contends that: (1) the assessment should be adjusted to give credit for the output tax already accounted for by APL on the placement fees paid by Sponsor Airlines; (2) the assessment should be reduced so as to exclude that part of the training which took place outside the UK; and/or (3) the parties reached a binding agreement under s 85 VATA that the assessment be reduced so as to exclude the proportion of the payments - computed pursuant to specified methodology - which related to supplies of training outside the UK. 5. Nicola Shaw KC appeared on behalf of APL. HMRC was represented by Howard Watkinson. We have found their submissions, both written and oral, most helpful. Although we have not referred to every submission or argument advanced on behalf of the parties or to all of the materials or authorities to which we were referred, we have taken all of them into account. Evidence 6. In addition to an electronic hearing bundle comprising 2,260 pages, we heard from the following witnesses for APL: (1) Dean Barnett, the Director of Business Operations for the airline and academy training business L3 Harris CTS Airline and Academy Training Ltd (" L3 A&AT "). He is employed by L3 Harris Commercial Training Solutions Limited (" L3 CTS "), the parent of L3 A&AT. Before taking up his current position in 2019, Mr Barnett was, from 2016, the Commercial and Contracts Manager and was responsible for the contracts relevant to the Sponsored Training Programme (which is described below). (2) Alan Whittaker, the Global Pilot Selection and Placement Manager for L3 A&AT, a role he has help since September 2016. He is involved in the process of selecting cadets with a view to them being placed with an airline but was not involved in the drafting of the sections of the recruitment material dealing with the security bond. (3) Robin Glover-Faure, who, from 2019, has been the Vice President of Sales and Marketing of L3 Harris's Commercial Aviation Solutions Sector which includes L3 Harris's airline academy and pilot training business (owned by L3 A&AT), the manufacture and sale of pilot training systems and software (a business owned by L3 CTS)), and the provision of flight data analysis services (a business owned by L3 Harris Flight Data Services Limited (" L3 FDS ")). Between 2016 and 2019 he focussed on sales and marketing for L3 A&AT. Mr Glover-Faure is a director of L3 CTS, L3 A&AT and L3 FDS. He is also a director of APL. (4) Sarah Lockett, who gave evidence by video-link from New Zealand, was employed as the base support manager by L3 CTS Airline Academy (NZ) Limited (" L3 NZ "), a New Zealand subsidiary of L3 A&AT which provided flight training in New Zealand for cadets. (5) Charlotte Buckingham, the Head of Commercial for L3 A&AT and L3 data analytics business. She is responsible for negotiating contracts, putting together template agreements, dealing with the cadets' contracts and, more generally, for legal compliance. Between 2013 (when she first joined the L3 group) and 2019 Ms Buckingham held a similar role in which she was also responsible for the template agreements, but reported to the Head of Commercial. 7. We found all of APL's witnesses to be credible, straightforward and helpful who did what they could to assist the Tribunal, albeit with a slight reluctance common to all, to accept or agree with matters put to them in cross-examination that appeared to support HMRC's, rather than APL's, case. 8. It was agreed to reserve issues of quantum of the assessment (with any party at liberty to apply to the Tribunal for directions to resolve these issues if they could not be agreed). As such, although the witness statement of HMRC Officer Miranda Widger had been included in the hearing bundle and was admitted in evidence, she was not required to attend for cross-examination. Facts Corporate structure 9. APL which was incorporated in 2004 was, until the end of March 2025, a subsidiary within a group of companies, the L3 Harris Group, that provides training to airline pilots. APL was 100% owned by L3 A&AT which itself was owned by L3 CTS. L3 A&AT was formed to acquire the business of CTC Aviation Group plc (" CTC ") which it did in May 2015 through the purchase of shares in CTC Aviation Holdings. APL was previously part of CTC, which included CTC McAlpine Ltd and Airline Recruitment Limited. 10. Airline Recruitment Limited was the entity initially responsible for administering the Sponsored Training Programme, a role which was essentially taken over by APL following its incorporation. Sponsored Training Programme 11. The Sponsored Training Programme (" STP ") was originally conceived by McAlpine Aviation Training Limited and CTC as an alternative to the traditional method of airlines, such as British Airways (" BA "), paying upfront for the training of their future pilots and deducting part of that cost from their salaries in the first five years of their employment. 12. Under the STP a Sponsor Airline would, instead of paying for the training of its cadets, would pay a placement fee (equal to the cost of training) plus VAT on employing a fully trained cadet whose training had been sponsored (ie paid for) by APL (or before APL's incorporation a McAlpine Aviation or a CTC company). On paying the placement fee, the Sponsor Airline would receive the "security bond" (also equal to the cost of training) from APL that had been deposited with the APL by the cadet (pursuant to the sponsorship agreement between the cadet and APL). 13. This enabled the Sponsor Airlines to defer the (expensive) training costs of their pilots. Additionally, as Mr Glover-Faure explained, in the case of BA (which guaranteed loans taken out by cadets to pay the bond), it gave opportunities to those who would not have been able to obtain a loan to fund themselves or who, even if they could obtain funding, could not afford to take on the risk of not being employed at the end of their training. Something that, Mr Glover-Faure said, the British Airline Pilots Association (" BALPA ") agreed was a good means of facilitating the training of the next generation of airline pilots from more diverse backgrounds. 14. In summary, under the STP: (1) APL sponsored, ie paid for, the cadets' training with the aim of placing them with Sponsor Airlines (ie those airlines using the STP for its cadets) upon the successful completion of their training, in return for a placement fee equal to the cost of that training; (2) the cadets deposited a bond with the APL equal to the cost of the training it funded (the cadets also paid the training provider (usually L3 A&AT) for some elements of their training not covered by the bond, with such additional payments being subject to VAT); (3) upon placement of the cadets with a Sponsor Airline, and at the cadet's instruction, APL would transfer the bond to the Sponsor Airline which would tie the cadet to the Sponsor Airline; and (4) in the event that the cadets were not placed with a Sponsor Airline', the bond would be forfeited. An exception to this was where a cadet was unable to meet the required training standards and was removed from the STP. In such circumstances the bond would be refunded to the cadet (less a non-refundable deposit of £5,000) under a policy known as "performance protection" (see below) and the cadet given the option of continuing their training outside the STP. If that option was taken up the bond would be applied towards the cost of the cadet's training fee and would be subject to VAT. 15. The three main Sponsor Airlines during the Relevant Period, were easyJet Airline Company Limited (" easyJet ") from 2003, BA from 2011 for its Future Pilot Programme and, from 2014, Virgin Atlantic Airways (" Virgin "). These would collaborate with L3 A&AT to market the STP to potential applicants with advertisements on the websites of the Sponsor Airline and L3 in addition to other relevant social media channels. 16. Two types of cadets were accepted onto the STP: (1) 'tagged' cadets, those that had been selected by and given a conditional offer of employment with a Sponsor Airline prior to the commencement of their training; and (2) 'Whitetail' cadets who were selected by APL in the hope and/or expectation that they would ultimately be placed with a Sponsor Airline thus providing the Sponsor Airlines access to a large and diverse pool of suitably qualified cadets. 17. The Sponsor Airlines were involved in the recruitment process for the cadets as each airline had slightly different selection criteria. However, there was no selection criteria for the 10-15% of cadets who paid for their own training and were not required to deposit any bond with APL. The selection process involved a potential cadet making an application via a link on the L3 A&AT website (or via the website of the relevant Sponsor Airline, which would then redirect them to the relevant page of the L3 A&AT website). 18. The initial screening of the potential cadets would be undertaken by L3 A&AT to ensure that they met the minimum entry requirements. Those that passed the initial screening would be contacted by email and invited to a selection event. This initial screening would include vetting by and in accordance with the criteria set by the Sponsor Airline concerned, with the precise process varying from airline to airline. The final decision whether to offer a cadet a place was made by the Sponsor Airline. 19. The Whitetail cadets were selected through the L3 A&AT applicant system with their applications reviewed by L3 to ensure that they met the minimum entry requirements. Those that did would be invited to a Whitetails selection day. 20. Between 2013 and 2020, of the 200-300 cadets that were selected each year, 73% of those that completed their training were placed with a Sponsor Airline which paid a placement fee to APL. APL charged and accounted for VAT on the placement fees. Other than the VAT on the placement fee, the Sponsor Airline had no cash outlay as, on the placement of the cadet, it received payment by APL of the bond that had been deposited to it (APL) by the cadet, the amount of the bond being equal to the placement fee the Sponsor Airline paid to APL. 21. The salaries paid to cadets on their employment by a Sponsor Airline was, APL contends, a matter for that airline and was also subject to agreement by BALPA. 22. In the case of easyJet, the placement fee due to APL from 2016 was £69,000 (see paragraph 3 of the Appendix). A cadet having completed training was required, on commencing employment with the airline to make a loan to it of £69,000 which easyJet would repay at an annual rate of £11,223 over seven years (see clause 4 of the easyJet Loan Agreement at paragraph 49 of the Appendix). This had a bearing on the salary as is clear from the schedules below: easyJet Pilots' Pay and Benefits effective from 01 October 2015 Basic Salary by Roster without Loan Agreement Roster Pattern Flexible Roster 75% Flexible Roster 100% Fixed Pattern Senior First Officer £44,952 £59,936 £59,936 First Officer £36,618 £48,824 N/A Second Officer N/A £41,320 N/A Basic Salary for Pilots with the Loan Agreement Whilst under the Loan Agreement pilots will be on the following salary rate for the first seven years. After seven years' service on a UK contract (from the date the agreement comes into effect) pilots will move to the appropriate standard salary scale. £69k Scheme Roster Pattern Flexible Roster 75% Flexible Roster 100% Fixed Pattern Senior First Officer £33,729 £48,713 £48,713 First Officer £25,395 £37,601 N/A Second Officer N/A £30,097 N/A 23. As Constable J observed at [54] of his judgment in the judicial review proceedings in R (on the application of Airline Placement Ltd) v HMRC [2023] STC 1113 (the " Judicial Review Judgment " - to which we refer in more detail below): "Thus, it can be seen that the Basic Salary for someone starting employment with easyJet having been trained through APL and having 'loaned' the bond monies to [easyJet], is reduced by the value of the bond (as at 2015, amounting to £69,000) together with an amount for interest. The Basic Salary for a person employed in precisely the same position with equivalent level of training and experience but who had not trained through APL, earned £11,223 more a year. The difference in salary over 7 years was exactly commensurate with the value of the bond, plus interest." 24. However, when it was put to him in cross-examination that the salary of a cadet was "cut by the same amount" as the cost of training, Mr Glover-Faure said: "... the premise of your question is that the salary has been reduced, but the salary wasn't being reduced. The salary was the salary that reflected the particular circumstances of these individuals. The route through which they came to the airline, the training, the investment that the airline had made, the security guarantee of the loan: these are all things that have cost British Airways and I suspect easyJet, although easyJet didn't do the loan guarantees. And so we agree at a salary scale based on those criteria, and it's a higher salary scale if somebody has got experience. 1,000 hours on an Airbus 320 - you have an Airbus 320 rating - we would recognise that that attracts a higher salary. So the salary is the salary determined through industrial negotiation between ourselves and the trade union based on those type of criteria." 25. The same training was provided to both tagged and Whitetail cadets. If a Sponsor Airline subsequently found it was able to accept further cadets, it would approach APL with a view to "tagging" some of the Whitetail cadets. An advantage to the Sponsor Airlines was the flexibility of such an arrangement. Although they preferred to offer places on their programmes to cadets to whom they could offer employment when qualified it was not possible to predict the market within the airline industry (which can be particularly susceptible to major world events, eg, 9/11 and the covid-19 pandemic). 26. Cadets were trained for either the Airline Transport Pilot Licence (" APTL ") or the Multi-Crew Pilot Licence (" MPL "). The ATPL allows the pilot to fly a wider range of aircraft whereas the MPL (the course content for which is set by the airline and agreed with the Civil Aviation Authority) only permits the pilot to fly a specific aircraft for a specific airline. All Whitetails trained for the ATPL. Although most tagged cadets trained for the MPL (tailored to the requirements of their Sponsor Airline) some of the tagged cadets did train for the ATPL. 27. The Sponsor Airlines were involved in the creation of the cadets training syllabuses. These were subject to the approval of the UK Civil Aviation Authority (" UK CAA "). For example, schedule 1 to the Virgin Placement Contract (see paragraph 24 of the Appendix) required the: "... course syllabus to be agreed between [APL] and Virgin and submitted to the UK Civil Aviation Authority for approval by EASA [the European Union Aviation Safety Agency]." 28. In the case of BA, Mr Glover-Faure, observed that the structure of the training would be set and agreed by BA and the training providers. He explained that the training was monitored and "heavily controlled" by BA as is clear from, eg clause 14.1 of the BA Placement Contract (see paragraph 11 of the Appendix) under which APL was required to supply cadets who had been qualified to a frozen APTL level and completed a fully BA standardised Jet Orientation Course of groundschool and simulator time to achieve and MCC certificate followed by a rating on an aircraft specified by BA. 29. Although they did not interfere with a cadet's training (once the structure had been set and agreed) the Sponsor Airlines did receive regular reports to monitor the progress of their cadets and were also involved in their pastoral care. 30. Mr Barnett explained that that the Sponsor Airlines took their commitment to cadets with conditional offers of employment very seriously. They monitored the cadets' training and put measures in place to protect the cadets' welfare during their training programme. This included the appointment of liaison officers to provide mentorship and pastoral care. 31. Ms Lockett's evidence was that the Sponsor Airlines would even occasionally send a first officer to New Zealand as a morale boost. She recalled that BA were particularly good at doing this. As Mr Glover-Faure explained, given the significant financial risk it took by guaranteeing the cadets' loans to fund the bonds, BA took its cadets' admission into its Future Pilots Programme (" FPP ") very seriously. It employed a manager to run the programme and current BA pilots would volunteer as cadet mentors to "enthuse the cadets and help keep them on track". It also organised visits to BA and provided cadets with opportunities to travel on a BA service to gain experience of what their future job might entail. 32. The progress of the cadets on the STP was monitored by the 'Training Review Board' (" TRB ") a body within L3A&AT. This would meet monthly and make recommendations in relation to the cadets' training. If cadets were not meeting the required standards, the chief training pilots would recommend whether additional training was needed or, if it had reached the stage where a cadet's training should be terminated. The TRB would then make recommendations to APL in respect of the cadets on the STP. When the recommendation involved a cadet on an airline programme, the Sponsor Airline would be involved in the decision-making and their approval would be sought, but if the cadet was a Whitetail it was for APL to make that decision. 33. All cadets that had been selected for training under the STP were required to deposit a bond, referred to in the contractual documents as the "Security Bond", with APL. This was payable in instalments as set out in the sponsorship agreements between the cadet and APL. In several of the documents, and contrary to APL's case, it is referred to as being "in consideration" for the procurement or receipt of training (eg see clause 4.8.3 of the BA MPL Sponsorship Contract; clause 2.1 of the Virgin MPL; and clauses 1.1 and 1.9 of the Security Bond Addendum, at paragraphs 40, 45 and 48 respectively of the Appendix). 34. On the completion of their training and being placed with a Sponsor Airline the bond would, as noted above, on the cadet's instruction or agreement pursuant to the Sponsorship Agreement between the cadet and APL, be transferred in whole to the Sponsor Airline (see eg clause 4.6 of the BA MPL Sponsorship Contract, clause 2.4 of the easyJet MPL Sponsorship Contract and clause 3.3 of the Virgin MPL Sponsorship Contract at paragraphs 40, 44 and 45 respectively of the Appendix). 35. The bond was subject to forfeiture if, for example, a cadet chose to be placed with a non-sponsored airline, placed with a Sponsor Airline overseas, was not selected from the FlexiCrew hold pool within a two year period (see below) or voluntarily withdrew from the STP in which case , as Mr Barnett accepted, the cadet would have paid for their training. The cadet would also forfeit the bond if they were removed for breach of contract (see eg, clauses 4.8.3 and 13.3 of the BA MPL Sponsorship Contract and clause 4.3 of the easyJet Sponsorship Contract at paragraphs 40 and 44 respectively of the Appendix). However, if a cadet was unable to complete their training due to a lack of proficiency their bond (and any fee paid, less a non-refundable deposit of £5,000) would be returned to them under the STP's performance protection policy (" PPP "). Such repayments would be funded from APL's margin on the placement fee. 36. The PPP (as of April 2018) relevantly provided: "L3 CTS provides Performance Protection for cadet pilots who have qualified and enrolled on to [a] qualifying ... Programme. Performance Protection provides cadet pilots with protection for their Security Bond in the event that they do not meet the required standard at any point throughout their training. ... 1. Performance Protection applies to all training provided under the ... programme and is secured by the payment of the fees described therein. ... 2. In the event that the Cadet fails to meet the required training standards, Performance Protection shall cover the cost of remedial training, including re-test fees, where applicable, for the part of the programme that the Cadet has not met the required standard. ... 3. In the event that the Cadet is removed from the ... programme, Performance Protection shall return the fees paid by the Cadet, less the non-refundable deposit; ... ... 5. Performance Protection shall not apply, and will not result in a return of the fees paid [or the bond], where the Cadet through their action or inaction, breaches the terms of the Cadet Training Agreement & Cadet Sponsorship Agreement, voluntarily withdraws from the L3 CTS Programme, or the Cadet is removed from the L3 CTS Programme due to an incidence of misconduct ..." 37. APL operated the PPP (with broadly similar terms) until about mid-2019. 38. Mr Barnett explained that although clause 1 of the PPP referred to "fees", it should be read as having referred to fees and the deposit of any bond deposited by the cadet. This, he explained, "was a simple mistake, and it was certainly always the intention that we would refund the bond as well as the fees, and that was what we did in practice." Also, despite clause 4.5 of the easyJet MPL contract stating that any repayment of the bond will be at the "discretion" of APL (see paragraph 44 of the Appendix), neither Mr. Barnett, Mr. Glover-Faure nor Ms. Buckingham knew of any circumstance where the bond was not repaid to a cadet who failed to achieve the requisite proficiency. 39. As Mr Barnett and Ms Buckingham explained, only a small number of cadets were refunded due to their lack of proficiency. Terminations recorded on an L3 A&AT master spreadsheet show that, between 1 January 2017 and 31 December 2020, 21 cadets received a refund under PPP and 25 cadets chose to continue training outside the STP. 40. By 2017, as the cost of training had increased, both easyJet and BA (but not Virgin) tagged cadets, as well as Whitetail cadets, were required, under a "Cadet Training Agreement" between the cadet and L3 A&AT, to pay an additional fee and VAT thereon for that part of the cost of training that exceeded the bond that the cadet had deposited with APL. 41. In 2019 APL integrated the sponsorship and training contracts into a single "Cadet Pilot Training Agreement". This showed an amount broken down into "a training fee" and "security bond". The terms of the "security bond" were then contained in an addendum (see paragraphs 47 - 48 of the Appendix). If the Cadet failed due to non-performance after Performance Protection was withdrawn, they would forfeit the "security bond". The contracts from 2020 show that refund of any "security bond" was at APL's discretion. 42. The majority of the STP cadets were placed with easyJet. Until 2018 this was generally through the "FlexiCrew" scheme. As Mr Barnett explained, this scheme related to the provision of newly qualified FlexiCrew pilots who were placed in a "hold pool" and supplied to easyJet by Airline Recruitment Limited on zero-hour contracts. These pilots would generally be employed by easyJet if it identified sufficient consumer demand to increase the number of pilots it employed on a full-time basis. 43. A newly qualified FlexiCrew pilot could remain in the hold pool for up to two years and could, in addition to being employed by easyJet, be selected for employment by another Sponsor Airline or another airline altogether. It was unusual for a cadet to be remain in the hold pool for two years but, if not employed at the end of the two year period, as we have noted at paragraph 35, above, a cadet's bond would be forfeited. 44. The cadets' UK training took place in Southampton, Bournemouth and Coventry. For MPL the training comprised ground school, basic, intermediate and advanced training. For ATPL cadets it comprised ground school (Phase 1), multi-engine instrument rating (Phase 5 flying), upset prevention and recovery training, airline qualification course type rating and base training. 45. Actual flight training in aircraft (known as 'core training' for MPL cadets and 'Phases 2, 3 and 4 flying' for ATPL cadets) which lasted from eight to 12 months, depending on the type of licence a cadet was working towards and to which Sponsor airline he of she was tagged, generally took place overseas. During the Relevant Period this was mainly in New Zealand where approximately 200 cadets were training at any given time. Around 30% of these cadets were self-funded cadets from New Zealand or aligned to an airline in the Aisia/Pacific region with direct contracts with L3 NZ. The remaining 70% were STP cadets. 46. The flight training programme was designed by, and the responsibility of, L3 CTS Airline Academy (NZ) Limited (" L3 NZ ") a New Zealand subsidiary of L3 A&AT. L3 NZ was responsible for ensuring the cadets had the necessary medical certificates. It also arranged accommodation and visa renewals for the cadets and provided pastoral care and ensured that they attended the training. The progress of every cadet would be discussed by its Training Review Board each month and L3 NZ would liaise with L3 A&AT and share updates as to the cadets' progress as necessary. This included any recommendation as to whether a cadet's training programme should be terminated. 47. However, notwithstanding the liaison with L3 A&AT, any training issues arising in New Zealand would be dealt with by L3 NZ internally. Its Training Review Board would meet monthly to discuss each individual cadet. Although no employee from L3 A&AT attended these meeting all of the information was saved and shared to a database that both L3 NZ and L3 A&AT could access. This enabled L3 A&AT to update the Sponsor Airlines if required. 48. L3 NZ trained both tagged and Whitetail cadets. Although the training itself would be similar for tagged and Whitetail cadets, the airline programmes did have some of what were described by Ms Lockett as "particularities". Although she could not recall any "specifics", she gave as a "random example", that a particular airline might require their cadet to have to do four steep turns rather than three. 49. Although L3 NZ did have simulators and groundschool facilities in New Zealand, the cadets went to New Zealand mainly for flight training in planes. Very occasionally - perhaps once every two years - L3 NZ took a cohort of the cadets for groundschool training because the UK groundschool facilities were full. However, most of the time the cadets undertook their groundschool in the UK. This lasted for around six months. 50. The Head of Training at L3 NZ, Jon Stanwix, was responsible for all aspects of the training in New Zealand from the development of the course content to the organisation of the timetable and the actual provision of training. The flight training involved the cadets completing a series of lessons (referred to as "events"), each of which would involve different elements. The cadet was required to fly for a set number of hours with all of that flight training taking place in New Zealand airspace. 51. The L3 NZ planning team would coordinate with its UK equivalent to let them know how many candidates they should send to New Zealand for flight training and when to send them to ensure an even flow through the training. Although the overall training timetable was managed by the planning team, the daily flight schedules were organised by the scheduling team at L3 NZ. The scheduling team would organise the timetable around the availability of the cadets, flight instructors and aircraft, as well as taking account of the weather conditions. These variables meant that the schedule would need to be adapted daily - if not hourly - to make the timetable work. The scheduling team would also meet with the aircraft maintenance team every week to manage the training timetable around planned aircraft maintenance 52. The training provided by L3 NZ was regulated by the New Zealand Qualification Authority (" NZQA ") which has very stringent requirements for pastoral care (particularly in relation to students attending from overseas). Any education provider that wanted to enrol international students had to sign up to the Education (Pastoral Care of International Students) Code of Practice 2016 which was administered by the NZQA. In addition, to enable it to provide training, L3 NZ required approval from the UK CAA. Accordingly L3 NZ had its own UK CAA licence authorising it to train the cadets in New Zealand (in addition to its licence from the equivalent New Zealand aviation authority). 53. Following completion of the necessary events the cadets would return to the UK for their further training. 54. The last cadets under the Virgin programme commenced their training in 2018. Around the same time APL entered into a new contract with BA to place up to 100 cadets annually. In mid-2019 APL lost a bid to continue to provide candidates for easyJet although easyJet did continue to employ and pay placement fees for Whitetail cadets. Although it was hoped that new airlines could be attracted to the STP, this was scuppered by the start of the covid-19 pandemic in 2020 leading to APL withdrawing the STP in November 2021. 55. Tagged cadets who were still in training at the time had their conditional offers of employment withdrawn by easyJet and BA. Although it was understood that easyJet would accept the transfer of the bond and pay a placement fee if it subsequently offered a tagged cadet employment the position was less clear with BA. However, in the absence of any confirmation to the contrary it was assumed the position would remain as previously agreed. 56. In November 2021 easyJet determined that it would not participate in the STP and, in December 2020, APL wrote to all the cadets (except for those with conditional offers from BA) and advised them that the bonds would have to be forfeited. Ms Buckingham explained that APL had not included the BA cadets as it was understood that until the end of 2023, when it became clear that it was not the case, that BA would be paying a placement fee for any of the cadets with bonds to whom it had offered employment. Contractual Arrangements 57. The contractual arrangements underpinning the STP were: (1) a "Placement Contract" between APL (or its predecessor) and a Sponsor Airline under which APL agreed to provide trained cadets to the airline in consideration for the payment of a placement fee (the amount of which depended on particular requirements of the Sponsor Airline. easyJet paid a placement fee of £69,000, BA paid a placement fee of £84,000 and Virgin paid a placement fee of £109,000). (2) a "Conditional Employment Contract" between the cadet and a Sponsor Airline under which the Sponsor Airline offered the cadet employment conditional on the cadet successfully completing their training. (3) a "Services Contract" between APL and a flight training organisation (" FTO ") under which APL agreed to pay for the provision of training the cadet. (4) a "Sponsorship Agreement" between APL and the cadet under which APL agreed to procure the provision of training from the training provider and the cadet agreed to deposit a security bond equal to the net cost of the training. (5) a "Loan Agreement" as between the cadet and the Sponsor Airline. 58. Save for the services contract between APL and L3AT&T, these arrangements were all arm's length agreements between unconnected parties. 59. Ms Shaw, in Appendix 1 to the 'Appellant's Note of Evidence', helpfully set out the contractual terms to which we were referred and, as it is not disputed that these have the effect that APL contends (the issue between the parties concerns the economic and commercial reality of those contracts) we have included an adapted version of this as an Appendix to this decision. Contact with HMRC 60. A "CTC VAT Report" by Deloitte, dated 29 November 2007, records that the document: "... was produced as a result of our meeting on 20 August 2007. During 2002, McAlpine Aviation Training ('MAT') and CTC Aviation Group plc ("Group") were contemplating setting up a JV to run what is today known as the CTC Wings Programme ("the Wings programme"). In anticipation of the introduction of the Wings programme, in August 2002 MAT sought and obtained a ruling from HM Revenue & Customs ("HMRC") on the VAT treatment of the Wings programme. Subsequent to receiving that ruling from HMRC, in May 2004 Group bought MAT out of its share of the business and progressed with the Wings programme of its own accord. However, now that the Wings programme is up and running Group (including its subsidiary companies) has decided that it needs more certainty regarding the VAT treatment of various payments made to or held by Group or its subsidiaries. In particular, the retention of certain elements of bonds by Group/ its subsidiaries was not covered in the original ruling given by HMRC. Consequently, you have asked us to comment on the VAT treatment of the Wings Programme, any practical measures that may support any such analysis, and any possible alternatives or recommendations for the appropriate next steps for seeking further certainty on the VAT treatment. Please find below a summary of our findings and conclusions. Please note that we have only commented on the VAT aspects of the agreements we have been provided with and have not considered any other potential implications." 61. The Deloitte Report also referred to the requirement, mentioned above (at paragraph 33), on a cadet to deposit a bond with APL which, on completion of the cadet's training, was transferred by APL to the cadet's Sponsoring Airline when it paid a placement fee (in the same amount as the deposit) plus VAT to APL for the provision of the fully trained cadet. The Report continued, stating that the cadet may receive a reduced salary to take account of the placement fee the airline has paid to APL. 62. This was incorporated into a letter prepared by Deloitte in relation to the STP to be sent to HMRC and which included the following paragraph: "During their employment with the sponsor airline, the cadet may receive a reduced salary to take account of the fact that the sponsor airline has paid a placement fee to APL for the provision of the cadet. However, these arrangements are made between the sponsor airline and the cadet without APL being party to the agreement." 63. However, before the letter was sent to HMRC it was reviewed by the Finance Director of CTC who commented: "... we would like to remove this paragraph as it might indicate that the Cadet is paying for the training they received from CTC by way of taking a reduced salary once employed and therefore in effect the Cadet is paying for their training." 64. The paragraph was not included in the letter of 4 March 2009 and/or final report from Deloitte which was sent to HMRC requesting non-statutory clearance for the VAT treatment of the STP. On 17 July 2009 HMRC issued a letter (the " Clearance Letter ") which, as Constable J noted at [34] of the Judicial Review Judgment: "... confirmed that HMRC was in agreement with APL's proposed VAT treatment, in that the payment of the bond by successful cadets is not consideration for any supply by APL to the cadets, and that retention of the bond by APL upon early termination of the agreement between the parties is not consideration for any supply by APL to the cadets. The Clearance Letter explained the basis for this conclusion. It pointed out that the clearance was based upon the information provided, including the Programme brochure and the information on the CTC Wings website." 65. However, on 10 November 2016 HMRC wrote to CTC to "open an enquiry into the VAT treatment of the supplies ... in relation to the CTC Wings Programme". That enquiry and associated correspondence continued for a number of years culminating on 26 January 2021 with the issue of the decision letter and, on 16 August 2021, the assessment, the subject matter of this appeal. 66. Notwithstanding APL had appealed to the Tribunal on 20 May 2022, in early 2023 the parties entered into negotiations to agree that such part of the amounts paid by the cadets as related to training that took place outside the UK should be excluded from the assessment to VAT. Following an unsuccessful ADR meeting on 27 February 2023, HMRC invited APL to provide its written representations on the 'place of supply' of services, ie the training of cadets to enable these to be considered by HMRC's policy team. 67. These were sent to HMRC by APL's solicitors, Macfarlanes, on 2 May 2023 as an attachment to an email. Insofar as material, the representations state: " 1 Introduction 1.1 This paper is provided following discussions at the ADR held on 27 February 2003. At the meeting it was agreed that Airline Placement Limited ("APL") would provide further representations in relation to the alternative argument they have put forward on place of supply, and HMRC would ensure that these representations are considered by the appropriate policy holder. ... 1.3 For the avoidance of doubt, APL does not consider that there has been any supply of training to the Cadets. This paper is presented on the alternative basis (which is denied) that APL's primary position is incorrect and APL supplies training to the Cadets. In these circumstances, for the reasons set out below, each supply of training services to a Cadet will have been outside the scope of UK VAT to the extent that the training was performed outside the UK. 1.5 The question is where the activities undertaken by the relevant group companies are performed. As is clear from the details set out in the body of this paper, these activities are split between the UK and outside of the UK (primarily New Zealand). In such circumstances, the logical way forward is to carry out an apportionment between the activities performed in the UK and outside of the UK. The alternative - and the implication in HMRC's current position - is that UK VAT could be avoided entirely by setting up the same type of shell company outside of the UK to supply services performed within the UK. 68. The representations continue noting, at sub-paragraph 10.4 that it is necessary to consider the activities of L3 UK and L3 NZ to whom the training and organisation of training was subcontracted. Sub-paragraph 10.5 explains how both companies have similar infrastructure and carry out significant part of the training stating that, "[t]here is no basis for concluding that either L3 NZ or L3 UK is carrying out the essential activities, rather, the training is split between activities in the UK and activities outside the UK." 69. The material parts of sub-paragraph 11 provide: " 11 Proposed basis for apportionment 11.1 ... As explained further below, we consider an apportionment based on the cost of delivering training to Cadets in the various locations to be the most rationale and accurate option. ... 11.4 Using an apportionment based on cost where it is not possible to use values, accords with HMRC's recent guidance on the apportionment of consideration ... 11.5 On that basis we propose an apportionment based on the cost of delivering training in the UK to Cadets on the bonded programme throughout the assessment period versus the cost of delivering training outside the UK to the same Cadets in the same period. ... 11.7 Apportioning the bond payments received during the assessment period in the manner described above would give the following result: Cost of training delivered outside the UK during the assessment period £17,285,114 Cost of training delivered in the UK during the assessment period £30,136,520 Percentage of bond payments treated as consideration for supplies outside the scope of UK VAT 34% 70. The representations conclude at paragraph 12, "Next steps", stating at sub-paragraph 12.2: "If HMRC agree in principle with the basis of apportionment that has been proposed, we would be happy to discuss the calculations further." 71. By email of 3 May 2023, HMRC (Officer Miranda Widger) confirmed receipt of the representations stating that these would be forwarded to "specialist colleagues". On 26 September 2023 Officer Widger and Officer Peter Rowe, of HMRC's Policy Team, in a call discussed the representations following which Officer Rowe emailed Officer Widger with a summary explaining that the view of HMRC's Policy Team was: (1) APL is making a supply directly to the pilot student. (2) This supply is Business to Consumer and is one of services in connection with educational services. (3) The supplier (or in this case, L3 NZ on behalf of the supplier, APL) and students are present in the same place. (4) The place of supply is therefore the place where the activities are performed. 72. Officer Widger had a further call with Officer Rowe and the wider case team later in the afternoon of 26 September 2023. After discussing the view received from HMRC's Policy Team, it was agreed that a new decision should be made in relation to the place of supply of services with the assessments amended accordingly. 73. A letter, dated 31 October 2023, from Macfarlanes, records, inter alia, that on 27 September 2023 a call had been received from a Mr Ian Painter, of HMRC's Solicitor's Office to confirm that HMRC agreed with APL's proposal and that the next step would be to confirm the figures so that the assessments could then be amended on that basis. This is not disputed by HMRC neither is the fact that Mr Painter informed Macfarlanes that HMRC would shortly provide them with a letter confirming the additional information that was required to verify the calculations. He also noted that he would draft an application to the Tribunal that explained the situation and sought a further extension to the directions. 74. On 28 September 2023, HMRC (Mr Painter) made an application to the Tribunal for further amended directions to: "... extend the upcoming deadline for the exchange of lists of documents by 16 weeks in order to allow the Respondents to implement a change in its view re 'place of supply' and the resulting amendments to the assessments necessitated by the aforementioned change of view." 75. On 13 October 2023, HMRC (Officer Widger) wrote to Macfarlanes "in response to your email dated 2 May 2023 and the place of supply representations provided." The letter set out HMRC's original view that the STP was a business to consumer supply wholly supplied in the UK. It continued: " HMRC's revised view After due consideration of your representations on the operations of APL and the L3 group, HMRC has revised its view on APL's place of supply for the training that takes place in locations outside of the UK. ... It is [now] HMRC's view that: 1. L3 NZ and any alternative suppliers are making a supply to APL. APL is making a supply of training directly to the student. 2. The supply from APL to the Cadet is from a Business to a Consumer (B2C). 3. This B2C supply is one of services in connection with educational services, as outlined in VAT Notice 741A section 9.5. 4. Although the B2C supply in question is not 'related to an event', the guidance says that that is only likely to be the case in most cases. 5. The supplier (or in this case, L3 NZ on behalf of the supplier APL) and students are present in the same place. Therefore, the place of supply is the place where the activities are performed, in this case New Zealand ..." 76. However, on 20 October 2023 HMRC (Officer Widger) wrote to Macfarlanes in the following terms: "I write in relation to my letter to you dated 13 October 2023. I apologise but I must withdraw the ruling set out in that letter. HMRC has now completed further analysis of its position. During this analysis HMRC has been considering its legal position. For this reason I must withdraw my letter dated 13 October 2023 until I can provide a comprehensive explanation of HMRC's view on the place of supply of APL's services." 77. Macfarlanes responded on 31 October 2023 explaining that it was "not open to HMRC to withdraw from their clear agreement on place of supply". Essentially, Macfarlanes contended that HMRC's letter of 13 October 2023 amounted to an agreement under s 85 VATA. Judicial Review 78. Following receipt of the Decision Letter, APL commenced Judicial Review proceedings on the grounds that it, and the subsequent assessment, were a breach of its legitimate expectation that the VAT treatment set out in the Clearance Letter would apply for the duration of the Relevant Period and that it would not be withdrawn without fair notice and with retrospective effect. APL's alternative position was that even if there was no legitimate expectation, it was nevertheless unreasonable and/or an abuse of power for HMRC to withdraw the Clearance Letter without fair notice and with retrospective effect. 79. HMRC contended that, because of the absence of a full and frank disclosure in APL's request for non-statutory clearance, no legitimate expectation could arise on the basis of the Clearance Letter. In particular, HMRC relied on APL's failure to disclose that during their employment with a Sponsor Airline, a cadet might receive a reduced salary to take account of the fact that the airline had paid a placement fee for the provision of the cadet. 80. The judicial review was heard by Constable J on 10 and 11 May 2023. The Judicial Review Judgement was handed down on 19 May 2023. 81. Having been provided with the easyJet Loan Agreement (see paragraph 49 of the Appendix) and easyJet Pilots Pay and Benefits schedule, dated 1 October 2015 (see paragraph 22, above) showing that a Senior First Officer "without the Loan Agreement" would receive a higher salary than a Senior First Officer with a Loan Agreement, the difference being the amount of the bond, Constable J observed, at [55]: "... It is abundantly clear, therefore, that in relation to easyJet, the cadet in fact pays for their own training through a salary sacrifice and no part of the bond is, in reality, repaid to it. ... 82. Constable J also referred to statements included in APL's request for non-statutory clearance, the STP programme brochure for potential cadets and website, noting, at [57], that these gave: "... the clear and unambiguous impression to the reader of the material that the scheme was such that the cadet ultimately has its bond repaid to it in full, in a real rather than illusory way, and that the cadet was not therefore the one who (in reality) paid for their own training" He went on to observe, at [59]: "It is in these circumstances entirely understandable that [the Finance Director of CTC whose comments we refer to at paragraph 63, above)] had formed the impression that the fact of the salary sacrifice arrangement, 'might indicate that the Cadet is paying for the training they received from CTC by way of taking a reduced salary once employed and therefore in effect the Cadet is paying for their training'. This comment hits the nail on the head - although the word 'might' is something of an understatement." 83. Having found, at [60] of the Judicial Review Judgement, that APL's non-statutory review request and supporting information was "inaccurate and misleading" and, at [76], it was "materially so", Constable J dismissed APL's claim for judicial review. However, it is accepted, quite rightly, that the Judicial Review Judgment is not binding on this Tribunal although, as Mr Watkinson submitted, it is nevertheless "very persuasive". Issues 84. It is common ground that the following issues arise: (1) Whether the "security bond" paid by the cadets to APL was consideration for the supply of training, and therefore liable to VAT; (2) Alternatively, whether the STP arrangement gave rise to an abusive result under the principles set out in Halifax Plc v Customs and Excise Commissioners (C-255/02) and therefore, needs to be redefined; (3) If the security bond payable by the cadets to APL is either consideration for the supply of training or if that arrangement is found to be abusive, how should the arrangement be redefined and whether any assessment should be reduced to take into account VAT payments made on the placement fees paid by the Sponsor Airlines to APL; (4) Whether the parties made an agreement under s 85 VATA such that the assessments must now be treated as varied to exclude VAT assessed in relation to supplies of training purported to have been made in New Zealand or otherwise outside the UK; and (5) If, the "security bond" is consideration for the supply of training, whether the place of supply of the training was the UK or New Zealand and outside the scope of UK VAT. 85. Although the parties addressed issue (5) before issue (4), we consider it more appropriate to consider these issues in reverse order as, depending on our conclusion on issue (4), issue (5) may fall away. Whether security bond consideration 86. The law on this issue is well established and not in dispute. It is common ground that we should adopt the two step approach set out by the Supreme Court in Secret Hotels2 Ltd (formerly Med Hotels Ltd) v HMRC [2014] 2 All ER 685 (" Secret Hotels2 ") in which Lord Neuberger said, at [34]: In the present proceedings, it has never been suggested that the written agreements between Med and hoteliers, namely the Accommodation Agreements, were a sham or liable to rectification. Nor has it been suggested that the terms contained on the website ('the website terms'), which governed the relationship between Med and the customers, namely the Terms of Use and the Booking Conditions, were a sham or liable to rectification. In these circumstances, it appears to me that (i) the right starting point is to characterise the nature of the relationship between Med, the customer, and the hotel, in the light of the Accommodation Agreement and the website terms ('the contractual documentation'), (ii) one must next consider whether that characterisation can be said to represent the economic reality of the relationship in the light of any relevant facts, ..." 87. In taking such an approach it is necessary, in a case such as the present, where the question at issue involves more than one contractual arrangement between different parties, to consider the "whole" of the relationship between the various parties when assessing the issue of who supplies what services to whom for VAT purposes (see Secret Hotels2 at [30]). In doing so, we remind ourselves that, where there is a written agreement, the labels which the parties have used to describe their relationship "cannot be conclusive and may often be of little weight" (see Secret Hotels2 at [32]) and that, although contractual terms constitute a factor to be taken into account they sometimes do not wholly reflect the economic and commercial reality of the transactions (see HMRC v Newy (trading as Ocean Finance) [2013] STC 2432 at [52]). 88. It is common ground that, under the contractual documentation, there is a legal relationship between APL and the cadet which is one of sponsor and spondee and that the payment from the cadet to APL is characterised as a "security bond". However, the parties disagree as to whether the contractual documentation reflects the economic and commercial reality of the relationship between APL and the cadet in this case. It is therefore this issue, step two as described in Secret Hotels2 with which we are concerned. 89. In essence, Ms Shaw contends that the contractual documentation does reflect the economic and commercial reality. She says that the security bond paid by the cadet is not consideration for the supply of training as that training is paid for by the Sponsor Airline via a placement fee. Ms Shaw accepts that there is a legal relationship between the cadet and APL but submits that the relationship is one of sponsorship under which the cadet is required to deposit a security bond, not pay for training. 90. She also contends, relying on the decision of the Tribunal (Judge Raghavan and Mr Nicholas Dee) in Cabvision v HMRC [2013] UKFTT 721 (TC) at [171] (" Cabvision "), that the bond cannot be properly regarded as consideration for the supply of training as the bond monies are subject to a restriction and not freely at the disposal of APL as it was repayable to the cadet and transferred on their instruction to their Sponsor Airline. Additionally, Ms Shaw contends, that even if the Sponsor Airline did seek to have the cost of the placement fee reflected in the cadet's salary, as APL is not a party to such an arrangement this is a matter between the Sponsor Airline and cadet. 91. Although the Tribunal in Cabvision observed, at [171], that it was "clear from the authorities that consideration is the amount which is actually received" and that, "in looking at what is actually received ... it is necessary to look at whether there are restrictions on what is received such that the amounts are not at a person's free disposal", it continued, stating at [177] that: "... whether the purported restrictions in this case are such that the appellant cannot be said to have received the full amount, is something we think must be determined on the basis of the particular facts of this case." 92. As such, given the issue of any restriction on the use of the bond monies is a question to be answered on the facts, we do not consider that APL can derive any assistance from Cabvision . If, as a matter of fact, the "security bond" is a bond it cannot be consideration but if it is not, it will be consideration. 93. Although Mr Watkinson referred to what he described as "wrinkles" in APL's case at step one, where the bond is described in the sponsorship agreements as "consideration" (see eg clause 4.8.3 of the BA MPL Sponsorship Agreement at paragraph 40 of the Appendix; clause 1.9 of the Integrated Contact Security Bond Addendum at paragraph 48 of the Appendix; clause 1.1 of the Integrated Contact Security Bond Addendum at see paragraph 48 of the Appendix; and clause 2.1 of the Virgin Sponsorship Contract see paragraph 45 of the Appendix) he contends that the best approach is to take these features, which Ms Shaw put down to "loose language", as confirmation that the label, "security bond", in any of the contracts is merely that, ie a label, and to take that feature into account in assessing the overall commercial and economic reality. 94. As noted above, the parties agree that there is a legal relationship between APL and the cadets. However, they part company on whether there is any reciprocal performance pursuant to that legal relationship as required for there to be a supply of services effected by consideration (see Tolsma v Inspecteur der Omzetbelasting Case C016/96 [1994] STC 509 at [14]). 95. Ms Shaw contends that under the sponsorship agreements there is simply an obligation on the cadet to deposit a security bond. However, we agree with Mr Watkinson that there is reciprocity under the sponsorship agreements. For example, clause 1.1 of the easyJet MPL Sponsorship Contract requires APL to "sponsor and procure" the cadet's training; and the cadet, under clause 2.1 of that contract, is required to make payments to APL (see paragraph 44 of the Appendix). There is, therefore, a clear direct link. If the payments are not made by the cadet APL can cancel to the agreement (under clause 3.3.8, see paragraph 44 of the Appendix) and the training will not be provided. 96. However, as Ms Shaw contends, it does not necessarily follow that payment by the cadet is of itself, as a matter of commercial and economic reality, consideration for training. As is the case with any bond arrangement goods or services will not be provided in the absence of the security of a bond. That said, and contrary to Ms Shaw's submission that this indicates the Sponsor Airlines rather than the cadets are paying for training, we consider that payment by the cadets of that part of the training that exceeded the placement fee indicates a direct link between the bond and the reciprocal provision of training given that had the cost of training continued to increase, the cadets would be required to pay directly for it. 97. In order to determine whether, as Mr Watkins submits the term "security bond" is merely a label which, as we have noted above (at paragraph 93), was not always applied, it is necessary to consider how it actually operated. 98. Before doing so, however, it is necessary to address an issue arising out of Ms Shaw's closing submissions in which she contended that, despite the various agreements, and APL's witnesses, referring to a singular "security bond" to be paid to APL and subsequently transferred to a Sponsor Airline, there were in fact two bonds. 99. The first from the cadet to APL, the proceeds of which was returned to the cadet and, on the cadet's direction, transferred to the Sponsor Airline to fund the second bond. This was between the cadet and Sponsor Airline for the purposes of securing the Sponsor Airline against the risk of the cadet leaving its employment before it had seen a return on its investment in the cadet in the form of the placement fee. 100. Although Mr Watkinson referred to specific clauses that referred to the "Security Bond" in the singular (see eg clause 4.6 of the BA MPL Sponsorship Contract at paragraph 40 of the Appendix and clause 1.6 of the Integrated Contract Security Bond Addendum at paragraph 48 of the Appendix) and passages from the witness statements made by APL's witnesses that referred to "the bond" being transferred to the Sponsor Airline, we agree with Ms Shaw that it is not possible as a matter of legal and economic reality to conflate the two bonds and treat them as having been simply assigned to the Sponsor Airline. 101. First, there are different terms governing the bond between APL and the cadets and the bond between the cadets and Sponsor Airlines (see eg the easyJet Sponsorship Contract at paragraph 44 of the Appendix and easyJet Loan Agreement at paragraph 49 of the Appendix). Secondly, if the bond had been assigned to the Sponsor Airline by the cadet it would not have been necessary for APL to obtain the consent of the cadet to transfer the funds to the Sponsor Airline rendering clauses 4.6 of the BA MPL Sponsorship Contract, clause 2.4.1 of the easyJet MPL Sponsorship Contract and clause 3.3 of the Virgin MPL Contract (at paragraphs 40, 44 and 45 respectively of the Appendix) otiose. 102. As such, we find that the references in the various agreements to "the bond" should properly be construed as being references to the proceeds of the bond rather than the bond itself. However, such a conclusion does not resolve the issue of whether as a matter of economic and commercial reality those proceeds were returned to the cadet. 103. Ms Shaw submits the proceeds were returned to the cadet on the completion of training when the funds were transferred to the Sponsor Airline on the cadet's instruction in accordance with the sponsorship agreements (eg clause 4.6 of the BA MPL Sponsorship Contract, at clause 2.4.1 of the easy Jet MPL Sponsorship Contract and clause 3.3 of the Virgin MPL Sponsorship Contract at paragraphs 40, 44 and 45 respectively of the Appendix). 104. However, we agree with Mr Watkinson who contends that even if there is scrupulous compliance with the obligations by the cadet (eg with clause 8 of the easyJet MPL Sponsorship Contract at paragraph 44 of the Appendix) and all of the training is completed, the bond or rather, as we have concluded, its proceeds are in reality never actually returned to the cadet. This is because these are transferred by APL to the Sponsor Airline which then pays the cadet a reduced salary to reflect in whole, or in large part, the sum of the placement fee. As such, and as a matter of economic and commercial reality, it is the cadet that has borne the costs of training. 105. It therefore follows that the bond does not function as a security bond at all and the description of it as such is merely a label which, as we have noted above (at paragraph 87), cannot be conclusive. 106. We find support for this conclusion not only from the contractual references to the bond (ie its proceeds) being referred to as "consideration" (see paragraph 93, above) but also from sub-clauses 6.4 and 6.5 of Appendix A and 2.1 of Appendix B of the updated BA Placement Contract (see paragraphs 15 and 17 of the Appendix) from which it is clear that "on transfer" of the proceeds of the bond by APL to BA, BA will pay the same amount to APL (clause 6.5 of Appendix A) and that "in return" for payment of the placement fee APL will transfer the proceeds of the bond to BA (clause 2.1 of Appendix B). 107. Additionally, and perhaps of greater significance, is that our conclusion mirrors that of Constable J in the Judicial Review Judgment particularly at [55] where he said that it was "abundantly clear" that the cadet "in fact pays for their own training through a salary sacrifice and no part of the bond is, in reality paid to it" (see paragraph 81, above). 108. Although Constable J did not determine the issue that is before us, ie whether the bond was consideration for training, as this is a matter for this Tribunal, he did, in determining the issue before him, ie whether there was a breach of APL's legitimate expectation (see paragraph 78, above), reach conclusions on the reality of what happened. This is because he had to determine whether the information provided to HMRC by APL was materially misleading or inaccurate when compared with what actually occurred. 109. Like Constable J, at [59] of the Judicial Review Judgment (see paragraph 82, above), we also find it "entirely understandable" for the Finance Director of CTC to want to remove the paragraph to which we have referred in paragraph 62, above, regarding the reduction in the cadet's salary which "might indicate that the cadet is paying for the training received", in what was to become the non-statutory clearance request letter. 110. As Constable J noted at [59(3)]: "... APL cannot distance themselves from the importance of the salary sacrifice arrangement as part of the overall arrangement in circumstances when it was CTC itself that provided the predecessor scheme (which APL correctly asserts is materially similar to the 2009 Programme) and which, as set out in the 2003 easyJet contract, is stated as having been 'devised by CTC comprising all of the following elements': 'The transfer of the bond to the airline on completion of pilot training The payment by the airline of a reduced salary scale The repayment by the airline of the bond to the pilot over a period of employment'" 111. In reaching our conclusion, having taken into account the whole of the relationship between the various parties, that as a matter of commercial and economic reality it is the cadet paying APL with that payment being consideration for their training we reject Ms Shaw's submission that, if the cadet is paying anyone for their training it is the Sponsor Airlines. This is because there is no legal relationship under which the Sponsor Airlines are required to provide training to the cadets and no training was provided or procured by the Sponsor Airlines. Whether Halifax abusive 112. Having concluded that the security bond was consideration for the provision of training this issue falls away and, as such, it is not strictly necessary for us to address it. However, as it was argued before us, and in case of any further appeal, we have set out our conclusion on this issue, albeit not as comprehensively as would have been the case had we come to a different conclusion in relation to the consideration issue. 113. As the Court of Justice of the European Union (" CJEU ") observed in HMRC v RBS Deutschland Holdings GmbH (Case C-277/09) [2011] STC 345 at [53]: "... taxable persons are generally free to choose the organisational structures and the form of transactions which they consider to be most appropriate for their economic activities and for the purposes of limiting their tax burdens." 114. However, this subject to an exception for "abusive transactions" as discussed in Halifax plc v Customs and Excise Comrs (Case C-255/02) [2006] STC 919 (" Halifax "). In Halifax the Court noted, at [73], that where there is a choice of one of two transactions a taxable person is not required to choose the one which "involves paying the highest amount of VAT but may choose to structure their business so as to limit their tax liability. The Court continued: "74. ... it would appear that, in the sphere of VAT, an abusive practice can be found to exist only if, first, the transactions concerned, notwithstanding formal application of the conditions laid down by the relevant provisions of the Sixth Directive and the national legislation transposing it, result in the accrual of a tax advantage the grant of which would be contrary to the purpose of those provisions. 75. Second, it must also be apparent from a number of objective factors that the essential aim of the transactions concerned is to obtain a tax advantage. As the Advocate General observed in para 89 of his opinion, the prohibition of abuse is not relevant where the economic activity carried out may have some explanation other than the mere attainment of tax advantages. ... 80. To allow taxable persons to deduct all input VAT even though, in the context of their normal commercial operations, no transactions conforming with the deduction rules of the Sixth Directive or of the national legislation transposing it would have enabled them to deduct such VAT, or would have allowed them to deduct only a part, would be contrary to the principle of fiscal neutrality and, therefore, contrary to the purpose of those rules. a 81. As regards the second element, whereby the transactions concerned must essentially seek to obtain a tax advantage, it must be borne in mind that it is the responsibility of the national court to determine the real substance and significance of the transactions concerned. In so doing, it may take account of the purely artificial nature of those transactions and the links of a legal, economic and/or personal nature between the operators involved in the scheme for reduction of the tax burden (see, to that effect, Emsland Starke [2000] ECR 1-11569, para 58)." 115. Although it must be a principal aim, it is not necessary for the tax advantage to be the sole aim of the taxpayer concerned (see Ministero dell'Economia e delle Finanze v Part Service Srl [2008] STC 3132 at [45] - " Part Service "). Also, as is apparent from Part Service , at [59]-[60], the tax advantage does not have to be for the taxpayer but can equally be for its customer. 116. It is clear from HMRC v Pendragon Plc and others [2015] 1 WLR 2828 that the effect of the whole arrangement or scheme has to be considered. This is because the principle of abuse of law is, as Lord Sumption observed at [13]: "... is, in this context, directed mainly to the method by which a commercial purpose is achieved, it is necessary to analyse each transaction by which it is achieved. Because the purpose of each step will generally be to contribute to the working of the whole scheme, ..." 117. In Massey (trading as Hilden Park Partnership and another v HMRC [2016] STC 304 (" Massey ") the Upper Tribunal (Rose J, as she then was, and Judge Sinfield) at [60] held that it was for HMRC to establish a that a tax advantage is contrary to the VAT Directives and the essential aim of the transactions is to obtain a tax advantage. 118. Assuming therefore, for the purpose of this issue, that we had concluded that as a matter of economic and commercial reality the cadet does not pay for their training, it is necessary to consider whether a tax advantage is obtained contrary to the purpose of the statutory provisions; and if so whether that was the aim of the STP. 119. Ms Shaw contends that the STP, although structured in a tax efficient manner as it was clearly entitled to do, did not result in any tax advantage to APL. Neither, she says, was the obtaining of a tax advantage the essential function to the STP, the essential aim of the STP was an alternative to the traditional method of airlines funding the training of their new recruits (see paragraphs 11 - 13, above). 120. However, as is clear from Part Service , it is not necessary for any tax advantage to be restricted to APL and any such advantage to its customers, ie for the cadets or Sponsor Airlines, could be enough to regard the STP arrangements as abusive. 121. As such, we agree with Mr Watkinson that there was a tax advantage in this case and that this comprised two cumulative components. The first that the Sponsor Airlines were able to deduct the input tax on the placement fee even though they were immediately recompensed in the same sum by the proceeds of the bond being transferred to it in return for the placement fee. The second component is that the cadet who bears the economic consequences of training does not pay VAT on those sums. 122. We also agree with Mr Watkinson that the STP arrangement was designed from the outset to achieve such a tax advantage. This is clearly apparent from the VAT analysis, as discussed in the CTC VAT Report (see paragraph 60, above). That VAT was critical to the commercial viability of the arrangement is also apparent from the reference to the supply of cadets in a "tax efficient manner " at sub-clause 4.3 of the Special Conditions in Schedule 1 to the BA Placement Contract (see paragraph 10 of the Appendix). 123. Finally, as confirmed in the Judicial Review Judgment, APL provided materially inaccurate and misleading information to HMRC (see paragraph 83, above) which, as Mr Watkinson contends, is a common feature of a tax avoidance scheme and also indicates that gaining a tax advantage was a principal aim of the STP. 124. Therefore, for these reasons, we find that, had we come to a different conclusion in regard to the consideration issue we would have concluded that the STP arrangement did give rise to a Halifax abusive result. Redefinition - whether credit should be given for VAT payments on placement fees 125. In Halifax at [94] the Court stated: "It follows that transactions involved in an abusive practice must be redefined so as to re-establish the situation that would have prevailed in the absence of the transactions constituting that abusive practice." 126. Therefore, as Mr Watkinson submits, redefinition of a supply only applies where there has been an abusive practice. As we would have found that to be the case if we had reached a different conclusion on the "consideration" issue, we would agree with him that, as the "VAT gap" is the failure to charge the cadet VAT, any redefinition would be to treat the security bond as a taxable supply of training to the cadet. 127. Ms Shaw contends that this (and our conclusion that the bond is consideration for training) would lead to double taxation as, in addition to the VAT on the supply of training to the cadet there would also be VAT on the supply of that same training under the placement fee and that credit should therefore be given. This she argues is not only a principle of basic fiscal fairness but a prerequisite for fiscal neutrality of the VAT system. 128. While that must be correct, it does not necessarily follow that there would be double taxation in this case. As Mr Watkinson submits, the better analysis is that there were two taxable supplies made by APL. The first of training to the cadets and the second of newly qualified pilots to Sponsor Airlines. When this was put to Ms Shaw by the Tribunal her response was why would the Sponsor Airlines pay such an "enormous price" and that the placement fee only makes sense if it is a payment for training, otherwise it would be "an absolutely exorbitant fee for a cadet that has already paid for their own training." 129. However, even if that is the case, as is clear from Massey at [76] the outcome does not have to be economically realistic when the transaction is redefined. Accordingly, we do not consider any redefinition to give credit for the VAT on placement fees to be necessary. Whether there was a s 85 VATA agreement 130. It is common ground that if there was an agreement between the parties under s 85 VATA in regard to the supply of training that took place in New Zealand, HMRC must give effect to it. It is also agreed that if there is to be an apportionment that 27.4% of the amounts received by APL from the cadets should be treated as relating to training in New Zealand. However, the parties part company on whether, in fact, there was such an agreement. 131. Section 85 VATA, insofar as applicable, provides: 85.— Settling appeals by agreement. (1) Subject to the provisions of this section, where a person gives notice of appeal under section 83 and, before the appeal is determined by a tribunal, [HMRC] 1 and the appellant come to an agreement (whether in writing or otherwise) under the terms of which the decision under appeal is to be treated— (a) as upheld without variation, or (b) as varied in a particular manner, or (c) as discharged or cancelled, the like consequences shall ensue for all purposes as would have ensued if, at the time when the agreement was come to, a tribunal had determined the appeal in accordance with the terms of the agreement. (2) Subsection (1) above shall not apply where, within 30 days from the date when the agreement was come to, the appellant gives notice in writing to [HMRC] 1 that he desires to repudiate or resile for the agreement. ... 132. In Schuldenfrei v Hilton (Inspector of Taxes) [2019] STC 821 the Court of Appeal considered whether the parties in that case had "come to an agreement" in relation to s 54 Taxes Management Act 1970 (" TMA "), the direct tax equivalent of s 85 VATA. Jonathan Parker J delivering the first judgment of the Court of Appeal said: "... . The question which arises under s 54(1) is whether the Revenue and the taxpayer have 'come to an agreement' in relation to the assessment under appeal. If they have, then the subsection itself prescribes the consequences which are to follow from that agreement. Thus, the question whether a s 54 agreement has been concluded has to be considered in a statutory, not in a common law, context. 43. That is not to say, however, that common law concepts such as that of offer and acceptance are not of assistance in addressing that question. It does not follow from the mere fact that parties are 'in agreement' in relation to a particular matter that they have concluded, reached, or 'come to' any agreement about it. As the commissioners rightly said: 'the fact that two persons find that they have the same expectations or objectives does not mean that they have come to any agreement' (see [1997] STC (SCD) 193 at 202, para 23). 44. To my mind, the notion of parties having 'come to' an agreement plainly implies not merely that they are of the same mind in relation to a particular matter, but also that their minds have met so as to form a mutual consensus; and that that a meeting of minds, that mutual consensus, has resulted from a process in which each party has to some extent participated. On that footing it is, in my judgment, both legitimate and helpful (as both sides have accepted) to approach the question whether the Revenue and the taxpayer have made a s 54 agreement in the instant case by applying common law principles of offer and acceptance." 133. In Delbourgo v Field (Inspector of Taxes) [1978] 2 All ER 193 at 197, Orr LJ (who was also concerned whether there was an agreement under s 54 TMA) said: "... in my judgment, the agreement, to fall within the section, must be an agreement that the assessment is to be upheld or an agreement that it be discharged or an agreement that it is to be varied and, if it is an agreement to vary, it must specify what the varied amount of the assessment is to be or, at the very least, must provide the commissioners with a basis from which the varied figure can be readily calculated." 134. As it is accepted that the same principles apply in the context of s 85 VATA (which is in very similar terms to s 54 TMA) it is necessary to consider whether the parties came to an agreement following the exchanges between them that we have set out above under the sub-heading "Contact with HMRC" (see paragraphs 66 - 77, above). 135. Ms Shaw contends that, although not expressed in terms of offer and acceptance, the substance and effect of the exchange between the parties is that APL, through its solicitors in the representations of 2 May 2023 (see above at paragraph 69) did provide the basis from which a varied figure could be readily calculated and that this was accepted by HMRC in their letter of 13 October 2023 (see paragraph 75, above). 136. Mr Watkinson, however, contends that the bases of a s 85 VATA agreement are not present. There is he says, no reference in the process to the settling the appeal or part of it, coming to any negotiated position on it, entering any contractual agreement any offer or any acceptance and even if there was it was withdrawn a week later before there had been any response to it. Moreover, he submits that any purported agreement is contingent on APL not accepting HMRC's primary case and therefore there has been no variation in terms of quantum or actual liability. 137. However, we have come to the conclusion that HMRC's response of 13 October 2023 was clearly acceptance of the representations made on APL's behalf on 2 May 2023 which, particularly at paragraph 11 of the representations (see paragraph 69, above), does give HMRC a basis from which the varied amount can be readily calculated. Accordingly, it follows that there was a s 85 VATA agreement between the parties in regard to the supply of training that took place in New Zealand. 138. We find support for this conclusion in the application to the Tribunal on 28 September 2023 in which HMRC sought an extension of time to exchange lists of documents to accommodate the "change in its view" regarding place of supply (see paragraph 74, above). 139. Although HMRC sought to withdraw from that agreement by the letter of 20 October 2023, we consider that this was an attempt to shut the stable door after the horse had bolted. By 20 October 2023 the parties had already entered into an agreement from which HMRC could not resile given that it must be treated, under s 85 VATA, as if "a tribunal had determined the appeal in accordance with the terms of the agreement". 140. We do not consider the fact that APL did not accept HMRC's primary case has any bearing on our conclusion on this issue. Given that APL had already appealed to the Tribunal at the time it entered into negotiations regarding the place of supply with HMRC it would have been understood by the parties that, as is the case with all litigation, they might not succeed on every issue and seek to reach agreement to cover that eventuality. Whether the place of supply of was the UK or New Zealand 141. Given our conclusion in relation to the s 85 VATA agreement this issue falls away. However, as with the "abuse" issue, as it was argued before us and in case of a further appeal, we shall briefly set out our conclusions in relation to this issue. 142. The general rule in relation to the place of supply of services are set out in s 7A VATA the relevant parts of which provide: 7A Place of supply of services (1) This section applies for determining, for the purposes of this Act, the country in which services are supplied. (2) A supply of services is to be treated as made— (a) in a case in which the person to whom the services are supplied is a relevant business person, in the country in which the recipient belongs, and (b) otherwise, in the country in which the supplier belongs. ... (5) Subsection (2) has effect subject to Schedule 4A. ... 143. For present purposes, the relevant paragraph of Schedule 4A is paragraph 14A. This provides: 14A Cultural, educational and entertainment services etc (1) A supply to a person who is not a relevant business person of services to which this paragraph applies is to be treated as made in the country in which the activities concerned actually take place. 144. Paragraph 14A gives effect to what was Article 9 of the Sixth Directive and is now Articles 52 and 54 of the Principal VAT Directive which provides that for educational activities the place of supply shall be the place where those activities are physically carried out. 145. It is common ground that the provision of training is an educational activity and that this was provided outside the UK, mainly in New Zealand where the cadets were physically present and received that part of the training on location from local instructors. 146. In Staatssecretaris van Financiën v L W Geelen Case C-568/17 (" Geelan ") the CJEU was concerned with the place of supply of services provided for consideration by Mr Geelen, who was registered for VAT in the Netherlands. Those services consisted of the offer of live interactive erotic webcam sessions, which could be viewed by several customers simultaneously, in which the models filmed were in the Philippines. The models worked for Mr Geelen who provided them with the hardware and software required to broadcast those sessions over the internet. To access the sessions, Mr Geelen's customers were required to create an account with one of the internet service providers. Those providers received the payments for those sessions from the customers and paid a portion of them to Mr Geelen. 147. Having noted, at [47], that the supply of services was a "complex supply" rendered by Mr Geelan rather than the models, the Court stated at [50]: "... since the activities necessary for the supply of those complex services are concentrated in the place from which the provider, on the one hand, organises the interactive sessions relating to the erotic show performed by the models and, on the other hand, provides customers with the opportunity to view those sessions on the internet, from the place of their choice, and to interact with those models, such a complex supply of services must be regarded as being 'physically carried out', within the meaning of Article 9(2)(c) of the Sixth Directive, in the place where that service is supplied by that provider, namely, in the case in the main proceedings, the place where his business is established: the Netherlands." 148. Such an approach was adopted by the Tribunal (Judge Sinfield) in St Georges University Ltd v HMRC [2021] SFTD 675 (" St Georges University ")in which it was agreed that St Georges University made a single supply of services relating to educational activities which took place in different countries (Grenada and the UK) at different times over a period of four years. At [133] Judge Sinfield observed that although the services were of a "very different nature" the case that appeared to provide the "closest parallel was Geelan . Applying that analysis Judge Sinfield said, at [143]: "Applying the CJEU's analysis in Geelen , it seems to me that the supply of the MD Course which, for some SGU [St Georges University] students, includes the GSP [Global Scholars Program which was provided at the campus of the University of Northumbria in Newcastle] and UK Clinical Training Programme, is a complex supply by SGU. Mr Beal was not inclined to accept that SGU was making a complex supply, however, I consider that it is properly described as such. SGU devises, organises and supervises the GSP and UK Clinical Training provided by the UNN and the UK Teaching Hospitals. SGU offers the students the opportunity to take part of the four year MD Course in the UK if they so choose. Where students choose to take part of the MD Course in the UK, SGU's services are not the performance of the underlying educational activity but the provision to students of the opportunity to take part of the MD Course in the UK and the organisation of the provision of education and training in the UK. I consider that, as in the case of Mr Geelen's supplies, the place where SGU's activities actually take place is where it makes all the necessary arrangements for the provision of the GSP and UK Clinical Training to the students, ie Grenada. It follows that SGU's supplies are outside the scope of UK VAT." 149. Ms Shaw submits that unlike Geelan the provision of training in the present case which took place in New Zealand was not a complex supply. She contends that it is readily apparent that L3 NZ operated with a high degree of autonomy over the training provided to the cadets provided on site in New Zealand which, she says, distinguishes the present case from St Georges University in which materials from the university in Grenada were used in the University of Northumbria in Newcastle, the Grenadian University designated the Associate Dean and provided course directorships. It also provided clinical tutors to assist with small group teaching and brought in visiting professors to provide specialist instructions. Accordingly, she submits, that it is necessary to apportion that part of the training that took part in New Zealand. 150. However, as Mr Watkinson contends, it is apparent from the contractual documentation that it is APL that devises, organises and supervises the training. APL services are not the performance of the underlying training but the provision to the cadets of the opportunity to take part in it and the organisation and the provision of training in the UK and New Zealand. As such, the place where APL's activities actually take place, is where it makes the necessary arrangements for the provision of that training, ie the UK. 151. Therefore, as in St Georges University apportionment is not necessary and as we do not consider it to have been wrongly decided and, as a matter of judicial comity, we would, if we had come to a different conclusion regarding the s 85 VATA agreement, have followed Judge Sinfield's decision in that case. Conclusion 152. For the reasons above, we have concluded that the payment of the security bond by the cadet to APL is consideration for the taxable supply of training to the cadets and therefore liable to VAT. However, given the s 85 VATA agreement between the parties, 27.4% of the amounts paid to APL by the cadets should be treated as training which took place outside the UK and therefore outside the scope of VAT. 153. Therefore, we allow the appeal in part to take account of the adjustment to reflect the agreement under s 85 VATA but in all other respects the appeal is dismissed. Right to apply for permission to appeal 154. This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to "Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)" which accompanies and forms part of this decision notice. Release date: 23 rd JULY 2025 appendix Material provisions of contractual arrangements underpinning the STP (see paragraph 58, above) adapted from Appendix 1 to the Appellant's Note on Evidence Contract Type Paragraph(s) (1) Placement Contacts 1 - 24 easyJet 2 - 4 BA 5 - 18 Virgin 19 - 24 (2) Conditional Employment Contracts 25 - 28 easyJet BA Virgin (3) Services Contract 29 - 36 (4) Sponsorship Agreements 37 - 45 BA 38 - 43 easyJet Virgin (5) Cadet Pilot Training Agreement (6) 2019 Integrated Contract Security Bond Addendum 47 - 48 (7) Loan Agreement (1) Placement Contracts 1. There were placement contracts between APL and each of the Sponsor Airlines (ie easyJet, BA and Virgin) although the easyJet placement contract, dated 11 August 2003, which predates the incorporation of APL was with CTC, under which APL (or CTC) agreed to procure or provide training for cadets. Material provisions of each are as follows: easyJet Placement Contract 2. The details of the STP in the easyJet placement contract (which comprised more than the STP) are set out in Appendix G1 of that contract. This states: " The CTC McAlpine Cadet Sponsorship Scheme CTC will provide The Users [ie easyJet] with cadets graduating from the CTC McAlpine Cadet Sponsorship scheme at an annual rate to be agreed from time to time. The scheme is provided under the following terms and conditions: i. Selection and aptitude testing will be accomplished by CTC prior to final interview and acceptance by The Users before commencing ab initio training. ii. Ab initio training (to frozen ATPL qualification) of the Cadet will be sponsored by Airline Recruitment Ltd secured against a Bond provided by the trainee pilot. iii. The Users shall sponsor the Cadet's living and subsistence throughout ab initio training to the value of £5000. ... iv. CTC will manage the process of training throughout and The Users will have access to the training records of the trainee pilots on request. v. Subject to continued suitability and proficiency, on completion of ab initio Training the trainee pilot will undertake Advanced and Type rating training on the type of The User's choice and thereafter undertake 6 months of Line training and experience without salary. This element of training is the same as the ATP scheme as described in Appendix D, ... and CTC will invoice The Users according to the charges applicable to the aircraft type on which the cadet is being trained. vi. ... The Users may employ the pilot on completion of the 6 months of line training and experience on terms and conditions as described in easyJet's Cadet Sponsorship salary scale. vii. On the first day of the Cadet's employment, CTC will invoice The Users for a placement fee of £60,000... On payment of this placement fee, CTC shall procure the transfer of the Cadet's bond (for the same amount as the placement fee) from Airline Recruitment Ltd to The Users. ... viii. Thereafter, in accordance with The User's terms and conditions of employment for a cadet pilot, in addition to the Cadet scale of salary applicable at the time, The User shall repay the Cadet's bond over a period of seven years at a monthly rate of £1000 per month - such payment being repayment of a bond loan." 3. By 2016 the bond and placement fee had increased to £69,000 and the cadet, rather than APL, paid for the foundation flying/core training and the type rating and base training instead of easyJet. 4. In addition to above provisions relating to the STP, easyJet entered into a "Pilot Supply Agreement" with Airline Recruitment Limited under the FlexiCrew arrangements (see above). However, the placement fee did not become payable (and the bond released by APL and transferred to easyJet) only when a pilot was became directly employed by easyJet. BA Placement Contract 5. BA entered into an initial placement contract with APL (referred to as the "Supplier" in the contract) on 27 July 2011. The recitals to that contract state: "(A) BA wishes to appoint the Supplier as a supplier of Cadet Pilots to BA through its Future Pilot Programme throughout the period of this Agreement, such supply being as fully described in this Agreement, subject to and in accordance with the provisions of this Agreement. (B) The Supplier agrees to provide such Services." 6. Clause 2.1 of the BA placement contract provide that the: "... Agreement is conditional on BA executing a separate services agreement with a Financial Service Provider for the provision of loans to the Cadet Pilots (Condition)". 7. Mr Glover-Faure explained that this clause was included to take account of accommodate BA's decision to offer its cadets a guaranteed loan scheme under which its partner bank provided cadets with a loan to fund the security bond with that loan being guaranteed by BA. 8. Other material clauses in the BA placement contract included: " 3. Services, Service Levels and Deliverables 3.1 The Supplier shall perform the Services and supply the Deliverables to BA ... ... 4. Ownership of Intellectual Property Rights, Confidential information and Deliverables 4.4 BA agrees to treat the agreement for sponsorship between the Cadet Pilot and the Supplier, the Security Bond Process between the Cadet Pilot and the Supplier and the Supplier to BA as Confidential Information. ... 7. Charges and Payment 7.1 BA shall pay the Supplier the Charges in accordance with this Clause 7 and Schedule 3. ... 7.3 Upon payment of the Placement Fee by BA to the Supplier, the Supplier shall immediately transfer the Security Bond Monies to the Cadet Pilot and shall procure that the Cadet Pilot immediately transfers the Security Bond Monies to BA. 9. Appendix 1 to the placement contract defines the above terms as follows: " Deliverables means the list set out in Schedule 2, paragraph 15; ... Security Bond Monies means the amount of 84,000 to be transferred to the Cadet Pilot by the Supplier and subsequently transferred by the Cadet Pilot to BA, providing that the Placement Fee has been paid; Security Bond Process means the process for the deposit of a security bond by a Cadet Pilot to the Supplier, the sponsorship of the Cadet Pilot to achieve the Qualifications, the Placement Fee charged to BA upon Unconditional Employment of the Cadet Pilot by BA, and the subsequent transfer of the Security Bond Monies by the Supplier to the Cadet Pilot and the Cadet Pilot to BA. For the purposes of this Agreement, the Security Bond Process and the sponsorship agreement issued to the Cadet Pilot by the Supplier are the Supplier's Confidential Information; ... Services mean the services to be supplied to BA and any other member of the BA Group by the Supplier under this Agreement including the services described in Schedule 2; ..." 10. Schedule 1 contains "Special Conditions" and includes under the sub-heading "Exclusivity": "4.3 BA warrants that the terminology used in any re-tendering process conducted by BA for the Future Pilot Programme, or any similar programme in design or name, will invite bids to supply Cadet Pilots in a tax efficient manner and, unless expressly authorised in writing to do so by the Supplier, will not include any specific details about the Security Bond Process." 11. The material provisions of schedule 2, which is headed, "Services: The Provision of Cadet Pilots by the Supplier to BA", include: " 10. Engagement 10.1 From the commencement date of this Agreement, BA shall engage the Supplier and the Supplier shall supply to BA the Cadet Pilots as required by BA from time to time, subject to availability and on the terms of this Agreement. 10.2 BA and the Supplier shall agree BA's requirements for Cadet Pilots in advance on a 12 monthly basis ("the Annual Review"). The first Annual Review shall take place within 9 months of the date of this Agreement or such later date as402greed between the Parties. The Parties shall agree on the number of Cadet Pilots to be supplied to BA and the dates the Cadet Pilots are required to enter Conditional Employment and Unconditional Employment with BA. BA shall have the sole right to approve a Cadet Pilot for Conditional Employment or Unconditional Employment with BA. ... 11. Responsibilities of the Parties 11.1 The Supplier and BA shall: a) perform their roles and duties with all due care, skill and ability and use their reasonable endeavours to promote the interests of the other Party; b) ...; c) promptly give to each other all such information and reports as they may reasonably require in connection with matters relating to the training and provision of Cadet Pilots; d) prior to sponsorship of the Cadet Pilot, he/she will be subject to suitability assessments, as agreed with BA, and carried out by the Approved Sub-Contractors. The Parties agree that BA will also conduct an interview and assessment process prior to offering a contract of Conditional Employment, such offer being at BA's sole discretion; e) upon acceptance of the pilot into the Future Pilot Programme, the Supplier will sponsor the Cadet Pilot up to the date of his Unconditional Employment with BA. ... 12. Status 12.1 The relationship of the Supplier with BA will be that of independent contractor ... The Supplier agrees that it will be the sponsor of the Cadet Pilot throughout the period of the training until the point of Unconditional Employment ... ... 13. Failure by BA to Offer Unconditional Employment to a Cadet Pilot 13.1 In the event that a Cadet Pilot who has completed all training and has reached all the proficiency and suitability requirements of BA is not offered Unconditional Employment as a pilot with BA, the following procedures shall apply: a) the Cadet Pilot may be offered an alternative non-flying position with BA with a view to subsequently being offered a position as a pilot at a later date. Where such an offer is provided the Cadet Pilot shall be under no obligation to accept such a position; b) BA may request the Supplier to determine if there are opportunities for that Cadet Pilot to be employed by another company as a pilot. For the sake of clarity, the Placement Fee as described in Schedule 3 shall not be payable by BA unless or until a contract of Unconditional Employment as a pilot with BA is offered to and accepted by the Cadet Pilot under the specific terms of the Future Pilot Programme. 14. Qualifications of Cadet Pilots 14.1 BA requires that all Cadet Pilots supplied by the Supplier shall be qualified to ATPL(f) licence standard (including Instrument Rating) ... The Cadet Pilots are also required to have completed a fully BA standardised Jet Orientation Course of groundschool and 44 hours of simulator time to achieve an MCC certificate followed by a JAA/EASA approved Type Rating course on an aircraft specified by BA. ... 15. Deliverables 15.1 Deliverables from the Supplier: a) Agreed Timetable; b) Procurement and delivery of performance reports of each Cadet Pilot; c) Management of the Cadet Pilot sponsorship termination process; d) Qualified Pilots delivered as per the Timetable; e) Transfer of Security Bond Monies by the Supplier to the Cadet Pilot and by the Cadet Pilot to BA; ... h) Sponsorship agreement with Cadet Pilot, ... 15.2 Deliverables from BA: a) Application process and selection process; b) Communication of requirements and standards ... ... e) Payment of the Placement Fee to the Supplier promptly; f) All airline specific manuals, technical documentation and/or software required to ensure that [the training is] standardised to BA procedures." 12. Schedule 3 of the BA placement contract, "Charges", provides: 16. At the time that a Cadet Pilot signs an Unconditional Employment contract as a pilot with BA ... a Placement Fee of £84,000.00 (eighty four thousand pounds) per Cadet Pilot shall be payable by BA to the Supplier, such sum being a placement fee for provision of a suitably qualified Cadet Pilot to BA. 17. Upon settlement of the placement fee invoice by BA to the Supplier, the Supplier shall immediately transfer the Cadet Pilot's Security Bond Monies to the Cadet Pilot and shall procure that the Cadet Pilot immediately transfers the Security Bond Monies to BA, as authorised by the Cadet Pilot under the terms of his sponsorship agreement with the Supplier ..." 13. The BA placement contract was updated in 2018 with a tripartite agreement between BA, APL and L3 A&AT (an FTO and sister company of APL) which were described in the agreement as the "Buyer", the "Sponsor" and the "Training Provider" respectively. Much of the arrangements in the above BA placement contract were carried over into the new contract which also makes provision for the payment of a training fee by a cadet to L3 A&AT to cover the increased cost of training above and beyond the amount BA was prepared to pay by way of the placement fee. 14. Material provisions of this updated agreement include the following definitions (at clause 1): "' Pilot Training Agreement ' means the individual training agreement (in the form set out in Appendix E) to be entered into between each Cadet Pilot and the Training Provider prior to commencement of the Training Course or the individual training agreement already entered into by the Non-Sponsored Pilot and the Sponsor ... ' Sponsorship Agreement ' means the individual sponsorship agreement (in the form set out in Appendix E) to be entered into between each Cadet Pilot and the Sponsor following successful selection of the Cadet Pilot in accordance with Appendix D or the sponsorship agreement already entered into by the Non-Sponsored Pilot and the Sponsor, as the context requires." 15. Appendix A of the updated agreement contains provisions concerning the "Training Programme" and, at paragraph 6 deals with the Sponsorship Agreement. Sub-paragraphs 6.3 to 6.5 provide: "6.3 The Cadet Pilot shall deposit a security bond with the Sponsor equal to £84,000.00 ("the Security Bond ") in accordance with the terms of the Sponsorship Agreement. 6.4 Pursuant to the terms of the Sponsorship Agreement the Sponsor shall procure the Cadet Pilot's consent to hold the Security Bond as security for the Cadet Pilot's performance of his or her obligations under the Sponsorship Agreement and on successful placement for employment to transfer the Security Bond, if so elected by the Cadet Pilot, to the Buyer. For the avoidance of doubt, the Sponsor shall not be required to hold the Security Bond separately from any other monies held or received by the Sponsor. 6.5 On transfer of the Security Bond to the Buyer, the Buyer shall pay the Sponsor the Placement Fee [of £84,000] ..." 16. Paragraph 7 is headed, "The Pilot Training Agreement". Sub-paragraph 7.1 requires the Training Provider (L3 A&AT) to comply with the Pilot Training Agreement. Sub-paragraph 7.3 provides: "7.3 Prior to commencement of the Training Course with the Training Provider by a Cadet Pilot, the Cadet Pilot shall pay the Training Provider a fee ("the Training Fee ") of: 7.3.1. £31,000 in respect of the MPL Training Course; or 7.3.2. £31,000 in respect of the ATPL including A320 type rating Training Course." 17. The fees are set out at Appendix B, sub-paragraph 2.1 of which provides: " Placement Fee 2.1. Following successful completion of the Training Programme by a Cadet Pilot and upon that Cadet Pilot commencing employment with the Buyer, the Buyer shall pay the Sponsor a placement fee of £84,000.00 ("the Placement Fee "). In return the Security Bond will be transferred to the Buyer in accordance with clause 6.3 of Appendix A. 18. Paragraph 3 of Appendix which is headed "Forfeiture of the Security Bond" provides: "3.1. A Cadet Pilot may forfeit their Security Bond which will be retained in full by the Sponsor in the event that: 3.1.1. the Cadet Pilot declines the offer to transfer the Security Bond to the Buyer in any circumstances; and/or 3.1.2. the Buyer refuses to pay the Placement Fee to the Sponsor;" Virgin Placement Contract 19. On 6 October 2014 APL (referred to in the placement contract as the "Company") and Virgin entered into a placement contract. 20. Clause 1 contains the definitions and interpretation section of the contract and includes the following definitions: "' Placement Fee ' means the amount of £109,000 paid by Virgin to the Company for the provision of a trained Cadet Pilot engaged in [the Virgin programme], payable upon the employment of the Cadet Pilot by Virgin and in accordance with clause 6 of this Agreement. ... ' Security Bond Monies ' shall mean those funds deposited by the Cadet Pilot with the Company as security during the period of training and which shall, on the Cadet Pilot's employment by Virgin, be passed to Virgin in accordance with the terms of this Agreement. ' Security Bond Process ' means the process for the deposit of a security bond by a Cadet Pilot to the Company, the sponsorship of the Cadet Pilot's flight training as described in Schedule 1, the Placement Fee charged to Virgin upon employment of the Cadet Pilot by Virgin, and the subsequent transfer of the Security Bond Monies by the Company to the Cadet Pilot and the Cadet Pilot to Virgin. For the purposes of this Agreement, the Security Bond Process and the sponsorship agreement issued to the Cadet Pilot by the Company are the Company's Confidential Information. ' Services ' means the services to be provided to Virgin by the Company under this Agreement as described in Schedule 1 and any subsequent schedules (or in additional instructions as may be provided by an authorised person on behalf of Virgin to the Company from time to time)." 21. Clause 2.1, "Appointment" provides: "2.1 In consideration of the payment by Virgin of the Placement Fees Virgin hereby appoints the Company to provide and the Company hereby agrees to provide the Services in accordance with the timetable agreed between the Parties and the terms of this Agreement." 22. Other material clauses include the following: "3. EXCLUSIVITY 3.1 The Company shall be the exclusive supplier to Virgin of inexperienced pilots (pilots with less than 500hrs flight time) for a period of five (5) years from the Commencement Date [ie 6 October 2014] ... ... 4. COMPANY'S OBLIGATIONS 4.1 The Company shall ... fulfil its obligations under this Agreement ... 4.2 The Company shall be responsible for the selection, training, instruction, control and supervision of Cadet Pilots accepted onto [the Virgin programme], notwithstanding clause 5.2 below. ... 5. VIRGIN'S OBLIGATIONS 5.1 Virgin shall afford the Company such access to its information, records and other materials as the Company may reasonably require, to provide the Services. 5.2 Virgin shall conduct a final selection process for Cadet Pilot candidates short-listed by the Company. 5.3 Upon the Cadet Pilot's confirmation of acceptance onto [the Virgin programme], Virgin shall issue a conditional offer of deferred employment ... ... 6. FEES AND EXPENSES 6.1 In consideration of the provision of the Services Virgin shall pay to the Company fees as set out in this Agreement or as otherwise agreed in writing by the Parties from time to time. ... 6.3 The Company shall submit invoices for the Placement Fee as soon as possible after the first day of employment of the Cadet Pilot. ... 6.4 Upon receipt of the payment of the Placement Fee the Company shall procure that the Cadet Pilot immediately transfers the Security Bond Monies to Virgin. ... ... 6.8 Where Virgin is unable to employ the Cadet Pilot within 24 (twenty four) months following the date on which the Cadet Pilot finished licence training (ab initio) for any reason other than (a) the Cadet Pilots proficiency and/or (b) non-compliance with VAA behavioural standards and conditions set out within the Conditional Offer of Deferred Employment and CTC behavioural standards hand-book and/or sponsorship contract, and the Company is unable to place the Cadet Pilot with another airline accepting MPL training Virgin's total aggregate liability (whether arising in contract, tort (including negligence) or otherwise) shall be limited to making a payment to the Company on the following basis outlined in clause 6.8.1 and 6.8.2 below. 23. Sub-clause 6.8.1 limits Virgin's liability to the amounts set out in the sub-clause and under 6.8.2 the maximum additional training costs is limited to £30,000 per cadet with no placement fee being payable. 24. In so far as it applicable to the present case Schedule 1 provides: " The Services - Provision of a trained Cadet Pilot The Company shall supply a number of Cadet Pilots to Virgin on a timetable and in number to be agreed between the Parties ... The Cadet Pilots will be provided to Virgin having completed an approved MPL course of training on the designated aircraft type. The course syllabus will be agreed between the Company and Virgin and submitted to the UK Civil Aviation Authority for approval by EASA. Training Records: Delivery of Training Records shall be made to the following addresses: [Virgin's address] Audit and Quality Assurance The company shall provide such access to and copies of approval documents and quality management records as may be reasonably required by Virgin ... (2) Conditional Employment Contracts 25. As with the Placement Contracts, each airline had its own process for offering potential cadets contracts. easyJet Conditional Employment Contract 26. On the successful completion of the easyJet pilot selection process and being identified as "suitable for the Generation easyJet Pilot Training Programme" a potential cadet would receive a letter from easyJet's Head of Flight Operations, headed "Conditional Offer of Employment" which the cadet was required to sign and return to confirm that: "I would like to congratulate you on your successful completion of easyJet pilot selection and in being identified as suitable for the Generation easyJet Pilot Training Programme. I write to confirm that, subject to the conditions set out in this letter being satisfied, that easyJet are pleased to make you a conditional offer of employment in the position of Pilot. To satisfy the training and flying time conditions, you will undertake a period with CTC Group Limited ("CTC"). At CTC, you will fly as a FlexiCrew pilot for a minimum period of 12 months ("Qualifying Period"). The conditions referred to above are that: a) You have attended and completed all Ab Initio and Type Rating training, and any other required courses and qualifications to be eligible to hold an Air Transport Pilots Licence (frozen) or Multi-Pilot Licence to the complete satisfaction of CTC; b) You meet the pre requisites (such as flying hours and time flying for easyJet) for the role of Pilot, as laid out in any easyJet new entrant terms and conditions; c) You hold a UK [pilot] licence; ... By signing this letter, you agree that you will accept a contract or employment as a pilot with easyJet on any type or aircraft, at any base operated by easyJet, once the conditions set out above are satisfied. If, during the period of the flight training or operating as FlexiCrew, in the opinion of CTC or easyJet you fail to achieve and / or maintain the standards of performance required of a cadet pilot, this offer will be withdrawn. Nothing contained in this agreement shall be construed or have effect as constituting any relationship of employer and employee between you and easyJet at this stage. For the avoidance of doubt, until such time as you satisfy the conditions set out in this letter and a formal contract offer is made to you, you will not be employed by easyJet. If you accept this conditional offer of employment and successfully satisfy the conditions set out above, we will extend a final offer of employment to you in writing along with the proposed terms and conditions of employment at the appropriate time. ..." BA Conditional Employment Contract 27. The BA equivalent is in the form of an agreement between BA and the cadet and described as a "Conditional Offer of a Contract of Employment". Material provisions state: "Whereas: 1. The Cadet Pilot has applied for and has been selected by British Airways to participate in the Future Pilot Programme (the "FPP"). 2. Subject to certain conditions being met, British Airways would like to make an offer of Employment to the Cadet Pilot, in accordance with the provisions of this Agreement It is agreed that: 1. Conditions for the Offer of a Contract of Employment as a Pilot 1.1 British Airways confirms that the Cadet Pilot to whom this offer is addressed has successfully completed the selection process for the British Airways FPP. They are, therefore, deemed suitable to hold a Conditional Offer of a Contract of Employment as an FPP Entrant Pilot at British Airways. 1.2 British Airways, therefore, at its absolute discretion and subject always to (but not limited by) the conditions set out in clause 1.3 below being satisfied ... agrees to retain the Cadet Pilot on the FPP and make the Cadet Pilot an offer of a contract of employment with British Airways ... on the relevant standard terms for Cadet Pilots from time to time in force. 1.3 The conditions referred to in clause 1.2 above are that: a) The Cadet acknowledges and understands that he must complete each element of the Training to the complete satisfaction of the Training Provider and British Airways ... ... 2. Acceptance of an Offer of Employment 2.1 By signing this Agreement, the Cadet Pilot agrees that he/she will accept an offer of a contract of employment as a pilot with British Airways ... on any type of aircraft, at any base operated by the British Airways Group ..." Virgin Conditional Employment Contract 28. A copy of the Virgin Future Flyers contract was not included in the Bundle. However, it was accepted that it was not materially distinguishable from the easyJet and BA agreements. (3) Services Contracts 29. As APL was not itself a training provider, its obligation under the placement and sponsorship agreements was to procure the required training for cadets usually through L3 A&AT or another L3 group company. Until L3 A&AT commenced trading, at the beginning of 2017, the training was provided by the original CTC companies (of which L3 A&AT was the holding company). When L3 A&AT did start trading it put in place a memorandum of understanding between APL, L3 A&AT, CAT NZ, CTC Aviation Training (US) Inc (the company that provided training in the Unites States), and Aerosim Flight Academy Inc (another company that provided training in the United States) which set out the training that the companies were authorised to undertake. 30. Flight training was also undertaken by third party FTOs with contracts between APL and Oxford Aviation and APL and Flight Training Europe under which APL purchased training from those companies. 31. By way of example we refer to the contract between APL and CTC Aviation Training (UK) Limited (described in the agreement as the "Supplier"), dated 28 July 2011, which is described as a "Services Agreement". The Recitals of that agreement state: "(1) APL provides sponsorship for Cadet Pilots to participate in the Training as described in Schedule 2 as a part of the British Airways Future Pilot Programme. (2) The Supplier agrees to provide APL with the Basic and Intermediate Training as described in Schedule 2 to this Agreement for such number of Cadet Pilots as is agreed between the Parties from time to time. (3) This Agreement sets out the terms under which the supply of Training is made by the Supplier to APL." 32. Although the Recitals refer to BA, Mr Barnett explained that this agreement also applied to all cadets under the STP. He also explained that the memorandum of understanding between APL and the other training providers referred to partner airlines generally and not a particular airline such as BA. 33. Material clauses of the APL/ CTC Aviation Training provide: " A7 Charges and Payment ... A7.2 The Supplier shall submit invoices to APL in accordance with the Fees described in Schedule 3, Such invoices shall detail the names of the Cadet Pilots in Training and the applicable instalment by reference to the schedule of Charges... ... A8 Status and Subcontracting A8.1 The relationship of the Supplier with APL will be that of independent contractor... APL agrees that it will be the sponsor of the Cadet Pilot throughout the period of the Training until the earlier of the date of employment with British Airways... or the termination of the Cadet Pilot's sponsorship agreement with APL. ... A17 Reporting and Audit A17.1 The Supplier's Head of Training shall provide APL with a written progress report for each Cadet Pilot... and any material issues which are adversely impacting or are anticipated by the Supplier to adversely impact the delivery of the Services and/or Deliverables..." ... 34. Schedule 2 to the agreement relevantly provides: "C1 Engagement C1.1 From the commencement date of this Agreement APL shall engage the Supplier, and the Supplier shall supply to APL the Training for the Cadet Pilots as required by APL ... ... C1.3 APL and the Supplier shall agree APL's requirements for the Training of Cadet Pilots in advance ... C2 Responsibilities of the Parties C2.1 The Supplier and APL shall: (a) perform their roles and duties with all due care, skill and ability... ... (d) prior to entering training the Cadet Pilot will be subject to suitability assessments carried out by the Supplier. The Parties agree that British Airways will also conduct an interview and assessment process prior to offering a provisional offer of employment, which shall be at British Airway's sole discretion. C2.2 APL will procure that each Cadet Pilot acknowledges and understands that he must complete each specified stage of the Training to the complete satisfaction of the Supplier and that in the event of him for any reason being unable to obtain the Proficiency required at any stage that subject to the provisions of his sponsorship agreement with APL, his Training may be terminated. ... C2.3 ...[S]ubject to agreement with APL in accordance to the provisions of Schedule 4 ... the Supplier may amend all or any of the Training on the proviso that any such amendment shall not substantially alter the purpose of the sponsorship for the British Airways Future Pilot Programme which is to prepare the Cadet Pilot for placement with British Airways. C3 The Training and the Qualifications C3.1 APL requires that all Cadet Pilots supplied by the Supplier shall have been trained to ATPL(f) ... licence standard ... The Cadet Pilots are also required to have completed a fully British Airways standardised JOC ... C3.2 The Training purchased by APL from the Supplier shall include the following items: [items tailored to meet specific requirements of the sponsor airline] ... ... C4 Terminating the Provision of Training to an Individual Cadet Pilot C4.1 The Supplier must cease the provision of Training under the terms of this Agreement to a Cadet Pilot immediately if: (a) the Cadet Pilot loses or has suspended his ... Licence to fly... (b) ... the Cadet Pilot ceases to hold a valid Medical Certificate... (c) the Cadet Pilot dies; (d) the Cadet Pilot is unable or declines to attend the Training ... (e) the Cadet Pilot does not or cannot meet the criteria to obtain full security clearance from any airport authorities; (f) the Cadet Pilot is convicted... [of] an offence... (g) advised by APL that the Cadet Pilot has breached the terms of his sponsorship agreement with APL; (h) the Cadet Pilot fails to achieve the level of proficiency required... (i) the Cadet Pilot is absent from any Training without prior written consent ... (j) ... (k) ...serious misconduct or gross moral turpitude ... ... (n) the Cadet Pilot withdraws from Training. C4.2 The Supplier may terminate the Training on giving 7 days notice to the Cadet Pilot if: (a) the Cadet Pilot fails to achieve [proficiency]... (b) ... (c) the supplier or APL... considers... that the Cadet Pilot is not suited to any Training C4.3 The procedure to be followed prior to the termination of the Training of a Cadet Pilot ... (a) that reviews have been completed by the Head of Training of the Supplier and the Head of British Airways Future Pilot Programme; and (b) that the results of those reviews are made available to APL ... ... C5 Refund of Charges in the Event of Termination C5.1 If, during the Basic Training, the Supplier terminates the Training of a Cadet Pilot because of the Cadet Pilot's inability to attain an ATPL(f) licence ... the Supplier will refund to APL the lesser of: a) the total amount of monies that have been paid to the Supplier on the date of termination reduced by a maximum... of £5,000... and b) £40,000 and such sum shall then be repaid to the Cadet Pilot by APL as a full or partial return of his Security Bond Monies. ... C5.3 The provisions of clause C5.1 shall not apply in the event of termination under clauses C4.1(a) to (n), with the exception of C4.1(h)... or where, at the sole discretion of APL, the Cadet Pilot is assessed by APL as deliberately failing to achieve the ATPL ... licence. ... C7 Performance Management and the Provision of Additional Training ... C7.2 If the Supplier considers that the Cadet Pilot is required to undertake Additional Training (which shall be solely at the discretion of the Supplier's Head of Training), the cost of such Additional Training and any other associated costs incurred by the Supplier in the provision of that Additional Training shall not be borne by APL and shall be invoiced to the Cadet Pilot directly by the Supplier at the rates included in an agreement between the Supplier and the Cadet Pilot. ... C10 Deliverables C10.1 Deliverables from the Supplier: ... b) Delivery of the Services to the agreed Standards; c) Delivery of performance reports of each Cadet Pilot; ..." 35. Schedule 3 to the agreement provides: "Charges D1.1 APL shall pay a Charge of £72,620, exclusive of any sales taxes, to the Supplier for the provision of the Training as described in Schedule 2. The Charge shall be paid in instalments in accordance with the table below: [in which it can be seen that each instalment payable by APL in respect of the training is matched with an equivalent bond payment from the cadet to APL]" 36. Mr Barnett explained that L3 A&AT would subcontract some elements of the training to other group companies incorporated and resident outside the UK (and, due to capacity issues, from 2019 to some third party companies. (4) Sponsorship Agreements 37. Contracts between APL and tagged cadets were in similar terms to those between APL and Whitetail cadets, the nature of the STP being the same for each. The difference being the size of the security bond and the training that would be provided. All contracts began with a table setting out key terms such as the relevant airline, the relevant programme, the approximate duration of the programme, the amount of the bond (£69,000 for Whitetails and easyJet; £84,000 for BA; £109,000 for Virgin), the dates the bond instalments are payable, and a description of the training. The table also sets out a "Special Condition" stating that the performance protection scheme would apply. BA MPL Sponsorship Contract 38. As with all APL sponsorship agreements, the standard terms and conditions are set out after the table described above. The "prerequisite requirements" include: "● Successful completion of the BA selection and referencing process. ● Evidence of availability of funds to the value of the programme fee Bond ● Receipt of [the first instalment] ..." 39. "Special Conditions", which "shall take precedence" in the event of any conflict between them and the Standard Terms and Conditions, include: "● L3 CTS's Performance Protection scheme shall apply, subject to the terms and conditions as may be amended from time to time." 40. Relevant provisions of the standard terms and conditions include: " 2. [The Cadet's] Obligations ... 2.2 [The Cadet] shall complete the Training: 2.2.1 with reasonable care and skill; 2.2.2 to the best of [the Cadet's] ability; ... 3. [APL's] Obligations 3.1 [APL] shall procure and deliver the Training in accordance with and subject to the approved Training Manual required to enable [the Cadet] to achieve a Proficiency level sufficient for employment as a commercial airline pilot. 4. Security Bond 4.1 [The Cadet] shall deposit the Security Bond with [APL] as security for your commitment to complete the Training and perform [the Cadet's] obligations in accordance with this Agreement. 4.2 The Security Bond shall at all times remain [the Cadet's] property ... 4.6 On successful completion of the Training and in the event that [the Cadet] secure[s] employment in the United Kingdom with an airline who has entered into a placement fee arrangement with [APL] then [the Cadet] will be asked to confirm [their] consent to [APL] transferring the Security Bond in whole directly to [the Cadet's] employer on commencement of employment. ... 4.8 In the event that [the Cadet]: 4.8.1. [is] employed by an airline which does not have a placement fee arrangement in place with [APL] or is based outside of the UK; or 4.8.2. [the Cadet] cancel[s] this Agreement at any time after the 'cooling off period'; or 4.8.3. [the Cadet] fail[s] to comply with the terms and conditions contained in this Agreement resulting in termination of this Agreement by [APL], then the Security Bond shall be forfeited to the Sponsor in consideration for the costs incurred by the sponsor in procuring the Training on [the Cadet's] behalf. 4.9 The Sponsor and/or any airline employer to whom the Security Bond is transferred shall not be required to hold the Security Bond separately from any other monies held or received by the relevant party. 5. Training 5.1 [The Cadet] shall complete each specified stage of the Training to complete satisfaction of the Training provider. ... 5.3 Additional training fees shall apply if [the Cadet] require[s] additional training to complete the Qualification. 5.4. All costs associated with additional training... shall be payable by [the Cadet]. ... 6. Completion of Training 6.1 On successful completion of the Training [the Cadet] may be eligible for: 6.1.1 further training stages; or 6.1.2 employment by an airline which has entered into a placement agreement with [APL]; or 6.1.3 placement in [APL's] graduate placement pool until selected for employment by an airline. ... 10. Status of Cadets 10.1 At all times this Agreement shall be considered a sponsorship arrangement between the Sponsor and [the Cadet]. 10.2 [The Cadet is] not, and shall not at any time during the term of this Agreement be deemed an employee of the Sponsor, the Training Provider, any airline which may work with the Training Provider or Sponsor... 10.3. Any offers of employment received by [the Cadet] from an airline shall be solely between [the Cadet] and the airline notwithstanding any involvement that the Sponsor may have in placing, arranging invitations to interview or introductions for you with said airlines or the payment of any placement or selection fees by the airline to [APL] in respect of [the Cadet's] employment. ... 13. Cancellation by [the Cadet] ... 13.3 On cancellation of this Agreement [the Cadet's] participation in the Training shall cease immediately and... [the Cadet] shall forfeit any monies paid in respect of the Security Bond in consideration of the costs incurred by the Sponsor in respect of the Training. ... 14. Cancellation by [APL] 14.1 [APL] may cancel this Agreement at any time on no less than 15 days' notice if: 14.1.1. [the Cadet] failed to achieve the level of Proficiency... 14.1.2. [the Cadet is] not suited to the Training; 14.1.3. [the Cadet is] removed from the Program by the airline; 14.1.4. ...[for] illness; 14.1.5. [failure] to pay any payment... ... 14.2 Notwithstanding clause 14.1, [APL] may cancel this Agreement on immediate notice if [the Cadet]: ... 14.2.2 lose[s] or [has their] licence to fly suspended; 14.2.3 die[s]; ... 14.2.5 [has] been in the placement pool awaiting an employment placement for a period exceeding twenty-four... months...; 14.2.6 agree[s] to be employed or engaged or are employed or otherwise engaged by an airline or other third party either via the Sponsor...; 14.2.7 [is] found to have committed gross misconduct...; ... 14.6 [The Cadet's] obligation to pay the Security Bond shall cease on cancellation of this Agreement and [the Cadet's] Security Bond will be dealt with in accordance with the table set out in Appendix A. 41. Appendix A at relevantly provides: "● Refunds will be subject to the deduction of an administration charge... ● [The Cadet] acknowledge[s] and agree[s] that any monies to be refunded may be paid by [APL] directly to [the Cadet's] loan provider in repayment of [the Cadet's] loan arrangement." 42. Various examples of cancellation are then provided in the table contained in Appendix A. Illustratively: (1) A full refund is available in the cooling off period. (2) Cancellation by the cadet under clause 13, or termination by APL under clause 14, after the commencement of training results in forfeiture. (3) Cancellation by the cadet prior to commencement of training, results in a full refund minus the administration fee. 43. These provisions were subject to the PPP (see above at paragraphs 34 - 39 of the decision). easyJet MPL Sponsorship Contract 44. Material provisions of the easyJet MPL contract include: " 1. THE TRAINING 1.1 ... APL shall sponsor and procure the Core (excluding the Core Phase Single Engine Flying Course), Basic and Intermediate phases of training required to complete the syllabus of the MPL, in accordance with and subject to the terms of this Agreement. ... ... 2 THE SECURITY BOND 2.1 THE PROVISION OF A SECURITY BOND The Trainee shall provide a security bond of sixty nine thousand pounds (£69,000) (the 'Security Bond') by way of security for his performance of his duties and obligations pursuant to this Agreement. The Trainee shall deposit the Security Bond to APL in UK £sterling in instalments by way of deposit in cleared funds to such bank account as APL shall from time to time specify in writing to the Trainee, on the dates set out in Schedule 2 and in the amounts specified therein. The Trainee hereby acknowledges and accepts that the purpose of the Security Bond shall be to provide security to APL for the performance by the Trainee of his obligations and duties in respect of this Agreement and that the Security Bond or part of it shall be forfeited and retained by APL in the event of failure or non performance of the Trainee pursuant to Clauses 4.3 and 5.2 below. ... 2.3 DURING THE TRAINING THE SECURITY BOND WILL BE HELD BY APL In the event that the Trainee is for any reason unable to successfully complete the MPL Training and be placed by APL with a Sponsor Airline, the Security Bond or part of it shall be forfeited by the Trainee and retained by APL in accordance with the provisions of Clause 4.3 to compensate APL for expenses it incurs as sponsor of the Trainee's Training. For the avoidance of doubt APL shall not be required to hold such Security Bond monies separate from any other monies of APL. 2.4 REPAYMENT OF THE SECURITY BOND ON PLACEMENT WITH A SPONSOR AIRLINE AND THE PASSING OF THE SECURITY BOND TO THE SPONSOR AIRLINE 2.4.1 In the event that the Trainee commences employment with a Sponsor Airline and the Sponsor Airline has paid APL a fee for introducing the Trainee to it, APL shall pay the Security Bond to the Sponsor Airline. The Trainee hereby irrevocably authorises APL to pay the Security Bond on his behalf direct to such Sponsor Airline upon commencement of his employment with such Sponsor Airline. Upon such payment being made APL shall have no further liability to the Trainee in respect of the Security Bond. ... 3 TERM AND TERMINATION ... 3.3 APL MAY TERMINATE THIS AGREEMENT IMMEDIATELY APL may terminate this Agreement immediately by notice to the Trainee, or to his personal representatives, as appropriate if: ... 3.3.8 any required deposits of Security Bond instalments are not made when due (time being of the essence for this purpose) or any standing order or direct debit for such instalments is cancelled or in any other manner terminated or is no longer in full effect; ... 4 CONSEQUENCES OF TERMINATION ... 4.3 FORFEITURE AND RETENTION OF THE SECURITY BOND In the event that the Trainee is not employed by a Sponsor Airline during the term of this Agreement or upon termination of this Agreement pursuant to Clause 3.2 (Trainee giving notice to APL) or any of the sub-Clauses of Clause 3.3 and clauses 3.4.1.2 to 3.4.1.4 inclusive or Clause 14 (Force Majeure), the Trainee shall forfeit and APL shall be entitled to retain from the Security Bond monies received by APL an amount by way of compensation for costs incurred by it in relation to the sponsorship of the Trainee. The Trainee acknowledges that in the event of such termination occurring after the Trainee has completed all the MPL Training the whole of the Security Bond shall be forfeited and no monies shall be refunded. ... 4.5 If during the MPL Training, APL terminates this Agreement under Clause 3.4.1.1, APL may, in its sole discretion but without being under any obligation to do so, repay to the Trainee the total amount of the Security Bond that has been paid to APL on the date of termination reduced by an amount not less than £5,000 to be retained by APL, this retention being compensation for costs incurred by APL in relation to the sponsorship of the Trainee ... 8 OBLIGATIONS OF THE TRAINEE 8.1 The Trainee binds himself to APL and shall devote the whole of his time, attention and skill in the performance of Training as APL and the Training Provider may require for the purposes of Training. The Trainee may not during the term of this Agreement, without the prior written consent of APL, directly or indirectly carry on or assist in carrying on or be engaged as an employee consultant director or otherwise, in any other business or work. 8.2 The Trainee shall be required to travel to, and undertake Training or be based at, such places within the United Kingdom and anywhere in the world as APL from time to time requires. 8.3 The Trainee shall at all times undertake Training: 8.3.1 with all reasonable care and skill; 8.3.2 to the best of his ability; 8.3.3 in a proper, safe and efficient manner; and 8.3.4 in accordance with all lawful orders and directions given from time to time by APL, the Training Provider or the Sponsor Airline its respective employees, agents or sub-contractors. 8.4 The Trainee shall at all times be bound to act in accordance with the Approved Manuals. 8.5 The Trainee shall at all times observe and comply with the terms of all and any agreements and arrangements made by him with a Sponsor Airline. For the avoidance of doubt APL shall have no liability in respect of any such agreement or arrangement. ... SCHEDULE 2 - Security Bond Payment Schedule Instalment Amount (£) Total Bond (£) Due Date 5,000 5,000 With signed contract and non-refundable 5,700 10,700 07/03/2015 5,300 16,000 01/09/2015 5,300 21,300 01/10/2015 5,300 26,600 01/11/2015 5,300 31,900 01/12/2015 5,300 37,200 01/01/2016 5,300 42,500 01/02/2016 5,300 47,800 01/03/2016 5,300 53,100 01/04/2016 5,300 58,400 01/05/2016 5,300 63,700 01/06/2016 5,300 69,000 01/07/2016 ..." Virgin MPL Sponsorship Contract 45. The Virgin MPL agreement is in similar terms and includes the following relevant provisions: " Special Conditions The Parties agree that in the event of any conflict between the Special Conditions and the Standard Terms and Conditions, these Special Conditions shall take precedence. ● ... ● CTC Aviation's Performance Protection scheme shall apply, subject to the terms and conditions as may be amended from time to time. ... 2. Payments 2.1. In consideration for the provision of the Training by CTC Aviation and/or the Training Provider, the Trainee shall deposit the Security Bond with CTC Aviation, in a timely manner by electronic transfer in accordance with the Payment Schedule and Payment Terms. ... 3. Security Bond 3.1. The Trainee acknowledges and accepts that the Security Bond shall be held by CTC Aviation to provide security for the Trainee's performance of the obligations contained herein. ... 3.3. In the event that the Trainee is successful in securing employment with a Partner Airline then CTC Aviation reserves the right to transfer the Security Bond to the Partner Airline upon the Trainee's commencement of employment on the Trainee's behalf." (5) Training Contract 46. Where cadets paid for their own training or any element of it they would enter into a contract with L3 A&AT (not APL). Such contracts did not include a security bond and the fees, and VAT thereon, was paid by the cadet. This applied to all easyJet and Whitetail cadets in relation to APTL or advanced MPL training and the 10-15% of the cadets that self-funded their training. (6) 2019 Integrated Contract Security Bond Addendum 47. The material provisions of the Security Bond Addendum to the 2019 Integrated Contract provide: "This Addendum forms part of the accompanying L3 CTS Cadet Training Agreement (the "Agreement") and shall apply if you are selected for one of our airline supported Training Courses. Capitalised terms (and "you", "your", "we", "us" and "our") in this Addendum shall have the meaning given to them in the Agreement unless otherwise defined. 48. The Agreement, at clause 1, defines "you" or "your" as "you the trainee cadet pilot" and "we", "us" or "our" as L3 Commercial Training Solutions, its subsidiaries and affiliates including the training provider and APL in its role as a training sponsor. The Addendum continues: SECURITY BOND 1.1 You shall deposit the Security Bond with us for us to hold it on trust as security for your commitment to complete the Training and perform your obligations in accordance with this Agreement and in consideration for the receipt of the Training. ... 1.6 On successful completion of the Training and in the event that you secure employment in the United Kingdom with an airline who has entered into a placement fee arrangement with us then we will transfer the Security Bond in whole directly to your employer on commencement of employment. 1.7 You will notify us in writing if you secure employment with an airline referred to in clause 1.6, together with your proposed commencement date, so that your Security Bond can be transferred to your employer. 1.8 In the event that you fail to notify us that you are commencing employment in accordance with clause 1.6, then the Security Bond shall be automatically forfeit. 1.9 In the event that you are employed by an airline which does not have a placement fee arrangement in place with us or is based outside of the UK then the Security Bond shall be forfeited in consideration for the costs of your Training. (7) Loan Agreement 49. An updated bond agreement between the cadet and the sponsor airline (here, easyJet) was included in the Documents Bundle. As can be seen in the following clauses, the effect is such that if the cadet leaves employment, their bond will be forfeited to the sponsor airline; but if the airline makes the cadet redundant during the bond term, it is repayable to the cadet by the airline. "1. easyJet have made you an offer of employment and one of the conditions is that you enter into this Agreement. ... ... 4. Upon commencing employment with easyJet and as a condition of you commencing employment, you are required to lend easyJet £69,000. easyJet shall repay you the loan at the rate of £11,223 per year for seven years, which includes an amount in respect of interest... providing you remain in employment with easyJet on a UK contract as a pilot during the repayment period. Repayments will be made in equal monthly instalments on or about the same time as you receive your salary. ... 6. On the termination of your employment for any reason whatsoever within seven years of the commencement of your employment, easyJet will cease to make repayments of the Loan to you. ... ... 8. For the avoidance of doubt, this Agreement will continue to bind you, save for those provisions requiring payments to be made by easyJet to you after the termination of your employment with easyJet for whatever reason save where easyJet terminates your UK employment by reason of redundancy. If, prior to what would have been the 7th anniversary of the start date of the Loan Agreement, you are made redundant by easyJet whilst on a UK contract of employment, then you will, in addition to any redundancy entitlement, receive a Loan Agreement compensation payment. The calculation of that payment will be the number of complete calendar months remaining between the date employment ends due to redundancy and what would have been the 7 th anniversary date multiplied by £935.29. No Loan Agreement compensation payment will be due to you in the event of your employment ending for any reason other than redundancy from the UK." BAILII: Copyright Policy | Disclaimers | Privacy Policy | Feedback | Donate to BAILII URL: https://www.bailii.org/uk/cases/UKFTT/TC/2025/TC09595.html