Wallace Wins Significant Damages for Novus Aviation
Wallace Wins Significant Damages for Novus Aviation
Following a 2 week trial in the High Court in May, Wallace successfully obtained a judgment for its client, Novus Aviation, against a Bahraini bank, Alubaf Arab International Bank BSC(c). The claim was for breach of contract arising from an aircraft leasing deal, for Malaysian Airlines, worth in excess of US$107m. Novus Aviation Capital, a privately owned, international aircraft leasing and financing company had sought equity funding for the purchase of the aircraft from Alubaf Arab International Bank. The bank issued a pre-completion commitment letter but then decided not to proceed with the transaction. The case involved issues around the enforceability of the short pre-completion commitment letter.
The purpose of the commitment letter had been to bind the bank to provide equity funding for the purchase of the aircraft in the agreed amount, unless the bank decided, in good faith, that the documentation prepared for the transaction was not satisfactory or the projected return from the investment was too low.
The Court held that the bank was contractually bound by the pre-completion commitment letter that had been executed by the bank’s Head of Treasury & Investments, on its behalf, to provide equity funding for the purchase of the aircraft. The decision of the bank’s Board not to proceed with the transaction amounted to an anticipatory repudiatory breach of contract. As a result of the breach of contract the Court determined that Alubaf Arab International Bank was liable for all of Novus Aviation’s losses arising from the bank’s withdrawal from the deal. Damages of US$5.5m were awarded by the Court.
In defending the claim Alubaf Arab International Bank had argued that the commitment letter was not legally binding – asserting that it was simply ‘an agreement to agree’ or it was ‘too uncertain’ or a ‘non-binding comfort letter’. The bank also argued that the commitment letter had been signed without authority. All of this was rejected by the Court.