In its decree delivered on the 24th May 2023, in the names of Hi Fly Limited (hereinafter sometimes referred to as the “Operator”) versus (1) Flypop Limited of London (hereinafter sometimes referred to as the “Sub-Lessor”), (2) UMB Bank, National Association of the United States of America (hereinafter sometimes referred to as the “Owner Trustee”) and (3) the Authority for Transport in Malta, the First Hall Civil Court presided by Hon. Justice Audrey Demicoli, once again re-confirmed that a warrant of prohibitory injunction may not be issued to prevent a holder of an Irrevocable Deregistration and Export Request Authorisation (hereinafter referred to as the “IDERA”) or a certified designee from enforcing its rights thereunder and proceed to de-register an aircraft from the Malta Aircraft Register.
Facts of the Case
A lease agreement was entered into between the Owner Trustee and Sub-lessor in its capacity as lessee, whereby the Owner Trustee leased an Airbus A330 aircraft (hereinafter referred to as the “Aircraft”) to the Sub-Lessor. By virtue of an underlying sub-lease agreement, the Aircraft was sub-leased by the Maltese Operator from the Sub-Lessor. An IDERA was subsequently granted by way of security in favour of the Owner Trustee by the Operator, thus authorising the Owner Trustee to enforce the IDERA should it be required.
It was claimed that an event of default was called by the Sub-Lessor entity under the sub-lease agreement due to non-payment of amounts due to it by the plaintiff company under said agreement – this effectively led to the Sub-Lessor serving the Operator with a Notice of Termination, demanding the termination of the existing Sub-Lease Agreement with immediate effect. Once the Owner Trustee was notified of this termination, it proceeded to avail of its rights under the IDERA and requested the Authority for Transport in Malta to de-register the aircraft from the Malta Aircraft Register.
The plaintiff entity argued that there was no basis for the Sub-Lessor to call an event of default under the sub-lease agreement since, amongst other things, it claimed that the sums owed to the Sub-Lessor were alien to the sub-lease agreement and/or the Aircraft, and that the Sub-Lessor failed to comply with the procedures for the termination of the sub-lease agreement. Therefore, the Operator claimed that the Sub-Lessor was acting abusively and in bad faith. Thus, in order to safeguard its rights under the agreement, the plaintiff company requested the Court to issue the warrant of prohibitory injunction and prevent the Authority for Transport in Malta from proceeding to deregister the Aircraft from the Malta Aircraft Register.
The Owner Trustee argued that it is simply exercising its rights under the IDERA which was duly issued by the Operator in its favour. It added that once the IDERA has been provided by the Operator, the latter entity should not expect that the Owner Trustee cannot avail of such right of deregistration of the Aircraft as it requires.
In its considerations, the Court made reference to a previous decree given by the First Hall Civil Court in the names of Air X Charter Limited and Air X Aircraft Finance I Limited vs. (1) Firm Mamo TCV Advocates as Deputy Curators acting on behalf of Avmax Aircraft Leasing Inc (Canada) as beneficial owner of eight (8) aircraft and Bank of Utah (United States of America) acting as owner trustee of the Aircraft and (2) The Authority for Transport in Malta (8 November 2021 – a summary of said judgement can be found here, whereby the court correctly considered that as is indicated in the Cape Town Convention and the annexes to the Aircraft Registration Act (Chapter 503 of the law so Malta), having granted the IDERA relating to a specific aircraft with its consent in favour of another party, the plaintiff entity in this instance did not have the right in terms of law to prevent the Transport Authority in Malta from processing a request for the deregistration of an aircraft that is made to it by a holder of an IDERA. The Court in this instance had correctly held that even though the deregistration of the aircraft could be of detriment to the operator entity, this should not be a relevant consideration as to whether the Authority for Transport in Malta are to proceed with the formal request for deregistration of an aircraft under the IDERA.
The Court held that it was in complete agreement with the Court’s conclusions in the Air X Charter Limited decree. The Court understood that the deregistration of the Aircraft would greatly prejudice the applicant Operator, but this was not relevant when determining whether the Authority for Transport in Malta should reject a regular request to de-register the Aircraft from its register. Therefore, it was re-confirmed by the Maltese Courts that a warrant of prohibitory injunction may not be issued to prevent a holder of an IDERA or a certified designee from enforcing its rights thereunder and proceed to de-register the Aircraft in line with Malta’s obligations under the Cape Town Convention and Aircraft Protocol, as doing so would prejudice the proper adoption and implementation of the Cape Town Convention and Aircraft Protocol here in Malta.
This decision further solidifies Malta’s position as an abiding Cape Town Convention jurisdiction and further supports Malta’s ranking on the Aviation Working Group compliance scoring index as a leading jurisdiction in terms of its adoption of the Cape Town Convention and Aircraft Protocol. The Court’s prompt action to remedy this situation is also to be commended, as the issuance of a provisional warrant of prohibitory injunction was lifted in just two weeks from the date of issuance of said injunction.
This article was written by Dr Marcus Rizzo Naudi (Associate, Ship finance & aviation).
