Arctic Aviation Assets Designated Activity Company v Companies Acts 2014
| Jurisdiction | Ireland |
| Judge | Mr. Justice Quinn |
| Judgment Date | 26 April 2021 |
| Neutral Citation | [2021] IEHC 277 |
| Docket Number | 366/2020 COS |
| Year | 2021 |
| Court | High Court |
IN THE MATTER OF ARCTIC AVIATION ASSETS DESIGNATED ACTIVITY COMPANY
AND
IN THE MATTER OF NORWEGIAN AIR INTERNATIONAL LIMITED
AND
IN THE MATTER OF DRAMMENSFJORDEN LEASING LIMITED
AND
IN THE MATTER OF TORSKEFJORDEN LEASING LIMITED
AND
IN THE MATTER OF LYSAKERFJORDEN LEASING LIMITED
AND
IN THE MATTER OF PART 10 OF THE COMPANIES ACT, 2014
AND
IN THE MATTER OF NORWEGIAN AIR SHUTTLE ASA, AS A RELATED COMPANY WITHIN THE MEANING OF SECTION 517 AND SECTION 2 (10) OF THE COMPANIES ACT, 2014
[2021] IEHC 277
Quinn
366/2020 COS
THE HIGH COURT
This judgment relates to an application by three companies in the Norwegian Group for approval pursuant to s. 537 of the Companies Act 2014 (“the Act”), of repudiation of contracts with nine counterparties who did not oppose the application. The three applicants are Arctic Aviation Assets DAC (“AAA”), Norwegian Air International Limited (“NAI”) and Norwegian Air Shuttle ASA (“NAS”), which is the parent company of the Group.
The background to the examinership of the companies and to this application has been described in detail in two previous judgments of this court. The First Judgment, [2020] IEHC 664, relates to the appointment of the examiner. The Second Judgment, [2021] IEHC 268, relates to applications pursuant to s. 537 for leave to repudiate 425 executory contracts with 68 counterparties. Many of those applications were opposed by the counterparties to the contracts. On 5 March, 2021, and on other dates, I made orders approving the repudiation of a number of those contracts and directed that a hearing be held pursuant to s. 537 (3) of the Act to determine the quantum of the losses incurred by the counterparties which had opposed the application.
In the Second Judgment, I considered and determined questions raised by the opposing counterparties regarding such matters as the test to be applied on an application under s. 537, the extraterritorial effect of these proceedings and of s. 537, the jurisdiction of this court where contracts are expressed to be subject to the laws of other states, issues regarding the Cape Town Convention on International Interests in Moveable Equipment and the Protocol thereto and the mode of determination of the quantum of the losses of counterparties. It is not necessary or appropriate to repeat here the consideration of those issues.
Section 537(1) of the Act provides as follows: -
“(1) Where proposals for a compromise or scheme of arrangement are to be formulated in relation to a company, the company may, subject to the approval of the court, affirm or repudiate any contract under which some element of performance other than payment remains to be rendered both by the company and the other contracting party or parties”.
This application is grounded on an affidavit sworn by Mr. Tore Jenssen, a director of the relevant companies, on 22 January, 2021.
The application is supported by the examiner who swore an affidavit on 28 January, 2021.
A central feature of the evidence presented to the court in the petition, and in the report of the independent expert accompanying the petition made in accordance with s. 511 of the Act was that the business plan which would underpin the restructuring envisaged a “ slimmed down” version of the Norwegian Group such that it would henceforth service a regional market and ultimately dispense with the long haul business which had been a feature of its success in previous years.
On 14 January, 2021, NAS made a public announcement in relation to its business plan, which included confirmation of the intention to cease long haul operations.
As a consequence of this decision, the companies say that a number of the contracts relating to the group's long haul business would be surplus to requirements. This applies to the contracts the subject of this application.
One of the petitioners, Torskefjorden Leasing Limited (“TLL”), was a company which had focussed exclusively on servicing the Group's long haul requirements. Therefore, TLL no longer formed part of the group's business plan. On 15 January, 2021, the examiner reported on this fact to the court and an order was made lifting the protection of the court with regard to TLL, discharging the examiner of TLL, and appointing joint liquidators of it.
Following the appointment of liquidators to TLL, the examiner remained of the view, based on the Group's business plan, that it is possible for him to formulate proposals for a scheme of arrangement in respect of the remaining companies. The evidence before the court on this application is that the examiner and the companies have determined that a number of agreements to which the companies are a party are required to be terminated in order to enable the examiner to finalise proposals for a scheme of arrangement. To this end they believe that it is necessary to repudiate certain contracts and to address the liabilities arising from such repudiation in schemes of arrangement to be formulated by the examiner.
NAS and NAI are both aircraft operating companies. For the most part, the contracts to which this application relates concern ground handling and/or fuel line services provided to NAS and/or NAI at a number of US international airports. It is said that consequent on the decision to dispense with long haul operations, such US-based services are no longer required by the Group and it is for that reason that the relevant companies are seeking leave of this Court to repudiate the relevant contracts.
The power of the court to grant approval for the repudiation of a contract is discretionary. Before the court considers the exercise of its discretion, it is necessary to examine firstly that the court has jurisdiction to make an order. Two conditions are necessary to establish jurisdiction, namely the following: -
(i) That this is a case in which “proposals for a compromise of a scheme of arrangement are to be formulated in relation to the company”.
(ii) That the relevant contract is a contract “under which some element of performance other than payment remains to be rendered both by the company and the other contracting party or parties”. Such a contract is frequently referred to as an “executory contract”.
In his affidavit sworn on 28 January, 2021, the examiner refers to the company's business plan. He states that under the proposed business plan the group would: -
(i) Focus on core businesses in the Nordic countries.
(ii) Cease to operate long haul routes.
(iii) Initially hold up to 50 Boeing 737 aircraft, primarily operating within Norway and other Nordic countries and between those countries and the rest of Europe.
(iv) That a significant reduction in the number of aircraft assets held by the group and of certain other services used by the group, will be required.
The examiner states that he and his team have been assisting the companies in assessing the fleet and services which on the basis of the business plan will be required after the restructuring of the companies. He continues: -
“My team and I have and are continuing to carefully consider the company's proposal as a basis for proposals for a scheme of arrangement for the company. Whilst the evaluation is ongoing I am of the view that I will be in a position to formulate schemes of arrangement that would facilitate the survival of the companies and the preservation of employment on the basis of the business plan proposed by the company”.
The examiner also states that in his view the termination of the contracts the subject of this application would facilitate the formulation of proposals for schemes of arrangement in respect of the companies. He states that the approval of the repudiation of those contracts would significantly enhance the prospect of the companies attracting the substantial investment that will be necessary to fund a scheme of arrangement to ensure the future survival of the companies and to finance the companies’ future working capital requirements.
Finally, the examiner states that he believes that the approval of the repudiation of the contracts would ensure that the companies are not burdened by ongoing obligations under contracts which relate to services which are surplus to the companies’ future requirements. He cites by way of example ground handling and fuel line contracts at airports located in the United States.
It was clear from this uncontradicted evidence that it is intended that proposals would be formulated in relation to the companies and accordingly this condition is fulfilled.
To establish whether this condition is fulfilled it is necessary to consider each of the contracts which the companies seek leave to repudiate. Most of the relevant contracts are stated to be subject to the laws of jurisdictions other than the State, and contain clauses submitting the resolution of any disputes to the court of those other jurisdictions. The companies exhibited evidence of the relevant foreign law with a view to assisting the court in establishing that the contracts in each case contain clauses constituting obligations in respect of which some element of performance other than the payment of money remains to be rendered having regard to the governing law of the contracts.
In respect of the laws of a number of states within the USA, this evidence is contained in a Report dated 29 January, 2021, by the companies’ counsel, Hogan Lovells US LLP, of New York. In this Report, Hogan Lovells consider the relevant contracts and confirm that they contain obligations to perform obligations other than the payment of money.
Many of the agreements on which Hogan Lovells gave their opinions were governed by the...
To continue reading
Request your trial