Global Knafaim Leasing Limited ('GKL') and CGTSN Ltd v The CAA and Others (11 June 2010)

Powers to impose a 'fleet lien', revisited.

In this recent case, a claimant leasing company failed to challenge the imposition of a statutory fleet lien against its aircraft on the basis that it was contrary to the Human Rights Act 1998 and anti-competitive.

The background facts

GKL owned and leased an aircraft (the "Aircraft") to the Canadian airline, Zoom Airlines Inc ("Zoom"). On 27 August 2008, Zoom collapsed and filed for Canadian administration owing substantial amounts for airport charges and air navigation charges. On 28 August 2008, the Aircraft was detained by BAA and the CAA for charges relating not only to the Aircraft but also to other aircraft in the Zoom fleet.

In order to release the Aircraft, GKL paid over US$2 million of which, it is estimated, only about 20 per cent related to charges incurred by the Aircraft. The balance related to charges incurred by aircraft in which GKL had no interest at all. It was that extension of the charges beyond the Aircraft which GKL considered to be unfair and unlawful.

The statutory framework

A 'fleet lien' is a statutory power. For BAA, this power is set out in Section 88 of the Civil Aviation Act 1982. For the CAA, an equivalent power is set out in Section 83 of the Transport Act 2000. Both statutes permit detention as against (i) the aircraft in respect of which the charges were incurred (whether or not they were incurred by the person who was the operator at the time the detention begins); or (ii) any other aircraft of which the person in default is the operator at the time when the detention begins.

In this case, the fleet lien was exercised under the second limb because GKL had not terminated the lease and Zoom was therefore still the operator of the Aircraft. Had GKL terminated the lease before the detention, it would have been liable only under the first limb to discharge monies owing in respect of the Aircraft. However, this did not happen and, because Zoom was insolvent, GKL had to pay all the fleet charges in order to have the Aircraft released and without having any realistic chance of recovering those amounts from Zoom (or anyone else, for that matter).

The claim

GKL challenged the detention of the Aircraft for charges incurred in relation to aircraft in the Zoom fleet that GKL did not own. It did not challenge detention for charges owed in respect of the Aircraft, nor did it question the detention power as against an operator for fleet debts under the second limb...