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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Gesner Investments Ltd v Bombardier Inc [2011] EWCA Civ 1118 (11 October 2011) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2011/1118.html Cite as: [2011] EWCA Civ 1118

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IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION COMMERCIAL COURT
MR JUSTICE BLAIR
2010 FOLIO 371

		Royal Courts of Justice Strand, London, WC2A 2LL
		11/10/2011

Lord Justice Rix :

1. This appeal concerns a short but knotty point of construction concerning the termination provisions of a contract for the construction and purchase of an aircraft. The issue is whether, after 90 days of non-excusable delay in tendering the aircraft for inspection and delivery, the buyer was entitled to terminate the contract forthwith, under clause 8.4, or could only do so by first serving a written notice under clause 9.2 specifying the default or breach and granting the seller the opportunity to remedy it. The buyer favours the former solution, the seller favours the latter. The judge, Blair J, preferred the submissions of the seller.
2. Put baldly like that, there would seem to be a certain air of unreality about the seller's position. Why, after 90 days of non-excusable delay, a period specified in article 8.4, should the buyer grant the seller still further time to remedy the situation pursuant to article 9.2? However, as will appear, the language of the contract tends to favour the seller.
3. If the buyer was not entitled to terminate the contract peremptorily, then it was the seller's termination on the ground of the buyer's failure to take delivery and pay the final instalment price which took effect. Upon this issue depends the seller's right to withhold 10% of the purchase price as liquidated damages for what would be the buyer's default. This is a sum of $4.4 million which the buyer claims, plus interest (about another $4 million).
4. The underlying facts were not in dispute and the judge was requested and able to deal with the litigation by giving summary judgment against the claimant buyer.

The contract

5. The contract was described as an Aircraft Purchase Agreement. It was dated 19 October 2006 but the claimant buyer, here the appellant, Gesner Investments Limited, became a party to it only upon a novation dated 20 November 2006. The seller is Bombardier Inc, the defendant below and here the respondent. The aircraft is described as a Bombardier Global Express XRS model BD-700-1A10. In its original form the contract provided for the aircraft to be ready and tendered for inspection within 30 days of 31 August 2009 (the so-called "Readiness Date"); for French law; and for arbitration in Paris. In its novated form, the contract provided for the aircraft to be ready within 30 days of 15 September 2009, ie by 15 October 2009; for English law; and for the non-exclusive jurisdiction of the English courts. The purchase price was US$ 44 million, payable by instalments.
6. The contract's delivery, delay and termination provisions, which have to be seen largely as a whole, are as follows. I have emphasised some critical wording:

"2.2 The Aircraft shall be ready for Buyer's inspection and acceptance at Seller's facility in the city of Dorval, Quebec, Canada within 30 days of 15 September 2009…

Article 5. Delivery and Inspection

5.1 Seller shall give Buyer reasonable notice to Buyer of the date on which the Aircraft will be ready, in compliance with the Specification except for minor defects or discrepancies which can be corrected in accordance with this Article 5 for Buyer's inspection and acceptance ("Readiness Date")…

5.2 Within 10 days of the Readiness Date, the Buyer agrees to perform such Aircraft inspection and if no defect or discrepancy is revealed, Buyer shall accept delivery of the Aircraft before the end of such 10 day period (the time of the acceptance of delivery of the Aircraft being the "Delivery Time"). If, within such 10-day period, Buyer or his inspection team fails to provide Seller with identified defects and/or discrepancies, then Buyer shall be deemed to have accepted the Aircraft on the tenth day.

5.3 Any defect or discrepancy revealed by Buyer's inspection and/or acceptance flight test shall be corrected before (or at the Buyer's option acting in good faith) after Delivery Time depending on the nature of the defect or discrepancy and the time required for correction. Such correction shall be at no cost to the Buyer. If such correction requires an additional flight test, it shall be conducted in accordance with Article 5.1. Buyer shall accept delivery of the aircraft within three days after any defect or discrepancy has been corrected…

Article 7. Loss or Destruction

7.1 If the Aircraft is lost, destroyed or damaged beyond economic repair before Delivery Time, this Agreement shall automatically terminate upon Seller giving written notice of such occurrence to Buyer. Subject to Article 12, Seller's sole obligation and liability shall then be promptly to return to Buyer all amounts previously paid to Seller under this Agreement with interest at the rate stipulated in Article 6.2…and such reimbursement constitutes Buyer's sole right, remedy and recourse, and Seller's sole obligation and liability to Buyer for a loss or destruction of the Aircraft…

Article 8. Excusable Delay and Non-Excusable Delay

8.1 Seller shall not be liable for any failure to deliver or delay in delivery of the Aircraft or delay in performance of any of its other obligations under this Agreement, due directly or indirectly to force majeure, acts of God, violence, fire, explosion, action of the elements or weather conditions, or other catastrophe or accident, any legislation, act, order, directive or regulation of any government or governmental body, labour trouble, delay or failure of carriers, subcontractors or suppliers (provided Seller commits to use reasonable efforts to find an alternative source of supply or carriage) or any other cause beyond Seller's reasonable control or without Seller's negligence ("Excusable Delay"). If the performance of Seller's obligations hereunder are, or in the reasonable belief of the Seller may be, affected by an Excusable Delay, Seller shall give prompt notice thereof to the Buyer. When the Excusable Delay has ceased to exist, then Seller shall promptly give notice thereof to Buyer by fax or electronic mail (to be followed by courier). In the event of any Excusable Delay, the time required for the performance of any obligation of this Agreement shall be extended for a period equal to the period during which any such cause and the effects thereof persist.

8.2 If delivery of the Aircraft is delayed by reason of Excusable Delay for more than 3 months, Buyer may (i) terminate the Agreement upon giving written notice to Seller, which notice shall be given within 15 days immediately following such period of 3 months or (ii) the parties shall agree on a revised Readiness Date. If Seller fails to comply with the revised Readiness Date due to excusable delay, Buyer may terminate this Agreement by providing written notice in the same manner as (i) above. Upon termination by Buyer pursuant to this Article 8.2, Seller's sole obligation and liability shall be, subject to Article 12, to promptly return to Buyer all amounts previously paid to Seller under this Agreement together with interest at the rate stipulated in Article 6.2…

8.3 If delivery of the Aircraft is delayed by Excusable Delay for more than 12 months, Seller may terminate this Agreement upon giving written notice to the Buyer, which notice shall be given within 15 days immediately following such period of 12 months. Upon such termination, Seller's sole obligation and liability shall be, subject to Article 12, to promptly return to Buyer all amounts previously paid to Seller under this Agreement together with interest at the rate stipulated in Article 6.2…

8.4 In the event the Aircraft is not ready for Buyer's inspection and acceptance within the time period stated in Article 2.2, for reasons of "Non-Excusable Delay" which shall be defined as any delay other than: (i) an Excusable Delay, (ii) an event described in Article 7.1, or (iii) a delay caused by Buyer, then Seller shall pay to Buyer as a credit against the Balance of the Purchase Price pursuant to Article 2.1 (iv) [the final instalment payable at delivery] as liquidated damages, but not as a penalty, an amount of (i) US $6,500 dollars per day for the first 30 days of Non-Excusable Delay; (ii) US $7,500 dollars per day from the 31^st to the 60^th days of Non-Excusable Delay; and (iii) US $8,500 dollars per day from the 61^st to the 90^th day of the Non-Excusable Delay, from the start of the Non-Excusable Delay until the earlier of (a) the date on which the Aircraft is presented to Buyer for final inspection and acceptance or (b) the elapse of 90 days of Non-Excusable Delay (the "LD Period") up to a maximum amount of USD $675,000. During the period that such liquidated damages are accruing, Buyer shall not have the right to terminate this Agreement pursuant to Article 9. In the event the Aircraft has not been offered for Buyer's inspection and acceptance after 90 days of Non-Excusable Delay, then Buyer shall have the right to terminate this Agreement pursuant to Article 9. In the event Buyer terminates this Agreement, then no liquidated damages shall be credited or owed to Buyer. This Article is provided for the sole benefit of Buyer and is not assignable or transferable and constitutes Buyer's sole, remedy and recourse, and Seller's sole obligation and liability to Buyer for Non-Excusable Delay. Additionally, in the event any major defect or discrepancy is revealed during Buyer's inspection which has to do with airworthiness or safety of the Aircraft or which makes the Aircraft non compliant with the Specification (but excluding defects or discrepancies which are commonly known in the industry as "snags" or "squawks"), then the period during which Seller corrects such discrepancy shall also be considered a Non-Excusable Delay and the provisions of this Article 8.4 shall apply.

Article 9. Termination

9.1 Either party may terminate this Agreement before Delivery Time by written notice of termination to the other party upon the occurrence of any of the following events: (i) the other party makes an assignment for the benefit of creditors, or admits in writing its inability to pay its debts; (ii) a receiver or trustee is appointed for the other party or for substantially all of such party's assets and, if appointed without such party's consent, such appointment is not discharged or stayed within 30 days; (iii) proceedings under any law relating to bankruptcy, insolvency or reorganization or relief of debtors are instituted by or against the other party and, if contested by such party, are not dismissed or stayed within 30 days; or (iv) a writ of attachment or execution or any similar process is issued or levied against the other party or any significant part of its property and is not released, stayed, bonded or vacated within 30 days after its issue or levy.

9.2 Buyer may terminate this Agreement before Delivery Time if, subject to Article 8.4, Seller is in default or breach of any material term or condition of this Agreement and does not act to cure such default or breach within 10 days after receipt of written notice from Buyer specifying such default or breach and does not continue thereafter to diligently correct or cure the alleged default or breach.

9.3 Upon termination of this Agreement pursuant to and in accordance with this Article 9, all amounts received by Seller on account of the Purchase Price shall, subject to Article 12, promptly be reimbursed to Buyer together with interest at the rate stipulated in Article 6.2 (the LIBOR component of such rate to be as published on the first day of the Excusable Delay), calculated on all payments made by Buyer to Seller from the date each payment was received by Seller until reimbursed to Buyer. Such reimbursement shall constitute the Buyer's sole right, remedy and recourse against Seller and Seller's sole obligation and liability to Buyer.

9.4 Seller may terminate this Agreement before Delivery Time if Buyer is named on any list published by a governmental body which would prohibit Seller from engaging in transactions with Buyer or the transaction is otherwise prohibited by law, or if Seller determines as a result of due diligence that it may not sell the Aircraft to Buyer without substantial risk of violating the law. In the event of termination under this Article 9.4, the rights of the parties shall be governed by Article 9.5 provided that (A) Seller shall retain the 10% liquidated damages provided for in Article 9.5 and (B) Seller's termination obligations pursuant to Article 9.4 shall be subject to all applicable governmental legal requirements…

9.5 Upon termination of this Agreement by Seller pursuant to and in accordance with this Article 9 or if Buyer fails to make any of the payments provided for in Article 2 on or before the stipulated date or within 3 calendar days following Buyer's receipt of written notification from Seller that such payment has not been made, all rights which Buyer may have or may have had in or to this Agreement or the Aircraft shall be extinguished; and except for termination in accordance with Article 9.4, Seller shall be entitled to retain an amount equivalent to 10% of the Purchase Price as liquidated damages for default and the parties shall thereafter be released from all further obligations to each other. Buyer agrees that such liquidated damages do not constitute a penalty and are a reasonable and agreed amount of the anticipated or actual harm or damages to be suffered by Seller as a result of or in connection with Buyer's default. All other amounts received by Seller on account of the Purchase Price shall, subject to Article 12, be promptly returned to Buyer."

Article 12. Cape Town Registration

…

12.3 In the event of termination of this Agreement for any reason whatsoever, any reimbursement to be made to Buyer shall be conditional upon Buyer discharging or causing the discharge of any registration created by or through Buyer or by persons claiming by or through Buyer…

Article 15. Sound Level Study

…

15.4 Seller guarantees that, at Delivery Time, the average sound level in the Aircraft will be 55 dB SIL (Speech Interference Level) or less based on a standard interior configuration with typical finishing materials. The actual sound level will be determined by the final interior mechanical layouts, equipment location and Customer-selected finishes and design details and will be verified through actual measurements performed as described above prior to Delivery Time…

15.6 Provided the Buyer has followed Seller's advice as indicated in Article 15.5 above and that the Buyer's selected interior configuration and finishing materials do not have a negative impact on the average sound level in the Aircraft, then:

a) in the event the average sound level is between 56 dB SIL and 60 dB SIL, Seller agrees to pay an amount, as liquidated damages, but not as a penalty, of US$20,000 per 0.5 dB SIL over 55 dB SIL. The total amount of such liquidated damages shall be credited against the final payment due at Delivery Time; or

b) in the event the average sound level exceeds 60 dB SIL, then Buyer shall right the right to terminate this Agreement pursuant to Article 9.

15.7 Buyer understands and agrees that the above described liquidated damages and termination right constitute the Buyer's sole right, remedy and recourse if the average sound level in the aircraft exceeds 55 dB SIL."

7. Thus the following structure of the contract will be observed. First, delivery does not ultimately take place until the aircraft has been inspected and accepted by the buyer: but the essential obligation of the seller is to tender the aircraft in readiness and in compliance with the specification, for the buyer's inspection, and to do so by the readiness date of 15 October 2009 (article 2.2 and article 5). If the seller fails to do this by that readiness date, it is prima facie in breach.
8. Secondly, the contract makes provision for delay, which is categorised as either "excusable" or "non-excusable". Excusable delay is essentially delay beyond the seller's reasonable control (article 8.1). Non-excusable delay is all other delay, save for delay caused by the buyer or the loss or destruction of the aircraft itself (article 8.2). Excusable delay of more than three months entitles the buyer to terminate the contract and to recover instalments already paid, with interest, but nothing more. The buyer has to make up its mind whether to terminate within 15 days of the end of the three month period. If the buyer does not terminate at that time, it has another chance to do so within 15 days of a twelve month excusable delay, with the same consequences. Termination for excusable delay, within those 15 day periods, is effected by serving written notice upon the seller. All this is provided for within articles 8.1 and 8.2. Since excusable delay is essentially delay for which the seller is not responsible, it is probably right to regard such delay as not constituting a breach of contract at all: hence article 8.1 provides that the time required for performance is extended by the period for which the excusable delay causes delay. Since the seller is relying on the excusable nature of the delay as a protection (subject to the buyer's rights of termination), it is required both to give written notice to the buyer of its reliance on such delay, and to give the buyer a further written notice when the delay has ceased to exist.
9. Non-excusable delay (dealt with in article 8.3), however, is delay in breach of contract. Its relevance appears only to affect the dominant obligation to tender the aircraft by the defined readiness day. Because it is a breach, it gives rise to liquidated damages, on a rising scale, over a period of 90 days, up to a limited total of $675,000. (The period of 90 days is almost identical to the first period of three months excusable delay which permits termination by the buyer under article 8.1.). Because the seller does not rely on non-excusable delay to extend the time for performance, there are no requirements for the giving of any written notices by the seller. It is expressly stated that during the running of the 90 days, the buyer "shall not have the right to terminate this Agreement pursuant to Article 9". Article 9.2 would otherwise give the buyer the right to terminate if the seller is in default or breach of a material term of the contract and does not act to cure such breach within 10 days of receipt of written notice from the buyer "and does not continue thereafter to diligently correct or cure the alleged default or breach". I will refer further to the concepts involved in article 9.2 termination below.
10. At the end of 90 days of non-excusable delay in tendering the aircraft, two things happen. Liquidated damages stop accruing, and the prohibition on article 9 termination is lifted: "then Buyer shall have the right to terminate this Agreement pursuant to Article 9". Article 8.4 does not itself state how such a termination should be effected, ie whether by written notice or otherwise. However, article 9.2 provides for a "written notice specifying such default or breach".
11. The article 8.4 concept of liquidated damages is something of a chimaera. They are only available, against the payment of the final instalment, if the buyer does not terminate (whether he has a right to do so or not). If he does terminate, then he has no remedy at all, other than the remedy of termination itself, which is stated in article 8.4. Article 8.4 states nothing, as articles 8.1 and 8.2 had done, about the return of instalments already paid, together with interest. This is despite the fact that article 8.4 (somewhat like articles 8.1 and 8.2) states "This Article…constitutes Buyer's sole, right remedy and recourse, and Seller's sole obligation and liability to Buyer" for non-excusable delay. For the remedy of the return of instalments already paid together with interest, one has to go to article 9.3, which contains similar language to articles 8.1 and 8.2 and repeats language such as that "Such reimbursement shall constitute Buyer's sole right, remedy and recourse against Seller and Seller's sole obligation and liability to Buyer". Thus without article 9.3, article 8.4 would not by itself generate the return of paid instalments with interest. Of course article 8.4 refers to article 9 – "then Buyer shall have the right to terminate this Agreement pursuant to Article 9". Article 9.3 states that the reimbursement with interest is triggered "Upon termination of this Agreement by Buyer pursuant to and in accordance with this Article 9…".
12. Article 9 is headed "Termination", but as already appears it is supplemented in this regard by the provisions of article 8. (There is a further reference to termination by the buyer for serious breach (over 60 dB SIL) of the sound level guarantee given by the seller. That right to terminate is also said to be a "right to terminate this Agreement pursuant to Article 9".) Article 9 provides for rights of termination by both buyer and seller. Either party may terminate in the standard situations often provided for, such as insolvency of the other party (article 9.1). Such termination must be made by written notice. Articles 9.2 and 9.3 provide for termination by the buyer, and articles 9.4 and 9.5 provide for termination by the seller.
13. The major issue in this appeal is whether article 9.2 applies to the situation where a buyer terminates for 90 days of non-excusable delay under article 8.4. Article 8.4, with its double reference to "pursuant to Article 9", would appear to suggest that it does. On the other hand, the question has arisen whether the procedure contemplated under article 9.2 could realistically and commercially work in the article 8.4 situation. It seems strange that after 90 days of non-excusable delay beyond the agreed readiness date, the buyer has to go through a further procedure of (a) specifying the default or breach, when that would be well known; (b) granting another 10 days' grace to the seller to "act to cure" the failure to tender the aircraft in readiness and compliance with specification; and then (c) if the seller does "act to cure" that failure within those 10 days, having to grant the seller a further entirely indefinite period of grace as long as it can be said to "continue thereafter to diligently correct or cure the alleged default or breach"; (d) without any further liquidated damages accruing, for they are limited to 90 days delay and the maximum amount of $675,000.
14. It is this mismatch between what appears to be the wording of the contract and what at the same time appears to be a sensible commercial result of such lengthy non-excusable delay which has both caused this dispute and led to the opposing submissions in this case.

The facts

15. The situation which led to the dispute can be briefly related. As stated above, the readiness date by which the aircraft should have been tendered for inspection was 15 October 2009. It is common ground that the delay which then ensued was non-excusable and that the period of 90 days of non-excusable delay expired on 14 January 2010. On 11 January 2010, ie shortly before expiry of that period, the seller served notice of the aircraft's readiness date, stating it was "scheduled for your final inspection on 18 January 2010". In the face of that notice, on 14 January the buyer served notice of termination. The notice is dated 14 January, but refers to that date in the past. It may have been sent the next day, but in any event no point has been taken that the notice was sent too early. The notice read:

"The Aircraft was not made available for inspection on or before 14 January 2010. This constitutes a breach of the Agreement and in accordance with its rights under clause 8 and the provisions of clause 9 of the Agreement, Gesner hereby terminates the Agreement and demands reimbursement of all amounts received in respect of the purchase price together with interest at the stipulated rate."

It will be observed that although clause 9 was referred to, no notice under clause 9.2 was served. The buyer submits that the reference to clause 9 was intended to be a reference to article 9.3 and the obligation to return the previously paid instalments with interest.

16. The buyer did nothing about inspecting the aircraft. If the buyer's notice of termination was not effective, then under article 5.2 the buyer was deemed to have accepted the aircraft after 10 days from the readiness date. And so, at the expiry of those ten days, the seller served a final invoice dated 28 January calling for payment of the final instalment in the sum of just under $10 million. The notice stated that if that invoice was not paid within 3 days, then automatic termination by the seller would occur pursuant to article 9.5, without further notice.
17. On 2 February 2010 the buyer's lawyers wrote to the seller to the effect that the buyer had terminated the agreement on 14 January 2010 and demanded repayment of instalments already paid in the sum of $34 million. On 5 February the seller responded to assert its rights to retain the 10% of the purchase price of $44 million as liquidated damages for the buyer's default. It therefore repaid only $29.6 million to the buyer, around 12 February 2010.
18. There is no suggestion that the seller was in bad faith in submitting its 11 January 2010 notice of a readiness date of 18 January. However, what would have happened if the buyer had inspected the aircraft on that day, we do not know.
19. On 23 March 2010 the buyer issued these proceedings for reimbursement of the $4.4 million deduction taken, plus interest. There was a separate issue before the judge as to whether, in any event, any interest would have been payable under article 9.3 (had the buyer succeeded in its claim). The seller disputed the payment of any interest, relying on the fact that article 9.3 referred to "Excusable Delay" and not non-excusable delay: but the judge held that this was a clear error of drafting (ie, he must have applied the maxim that a plain misdescription did no harm (falsa demonstratio non nocet) and thus would not have affected the buyer's entitlement to interest had the buyer succeeded in its claim. There is no cross-appeal from that holding.

Submissions

20. On behalf of the buyer, Mr Stephen Phillips QC submits that the reference to article 9 in article 8.4 is a reference to article 9.3 and not to article 9.2. The reference, he says, is to article 9 and not to article 9.2 and is thus subject to interpretation. He submits that article 9.2 does not apply to the situation in article 8.4. However, a reference to article 9.3 is necessary to enable the buyer to recover its paid instalments, something not otherwise mentioned in article 8.4. He draws attention to the uncommercial consequences of trying to apply article 9.2 to an article 8.4 situation. Such consequences are not only uncommercial in themselves, but fraught with uncertainty. And, as time continued to elapse as long as the buyer could say it had acted within the 10 days and continued diligently thereafter to continue to correct the default, no more liquidated damages were payable. If 3 months of excusable delay entitles the buyer to terminate without more ado (provided it does so within 15 days), it is impossible to think that the contract provides that the same period (90 days) of non-excusable delay does not equally permit a peremptory termination. Article 8.4 provides its own free-standing right of termination, with the consequences provided for in article 9.3.
21. On behalf of the seller, Mr Pushpinder Saini QC submits to the contrary. He relies on the repeated wording in article 8.4 "pursuant to Article 9". Article 8.4 merely suspends the article 9.2 right to terminate for 90 days, at the end of which the suspensive effect ends and "then Buyer shall have the right to terminate this Agreement pursuant to Article 9". That was why article 9.2, with its language of "subject to Article 8.4", itself cross-referred to article 8.4. If the draftsman had intended article 8.4 to be entirely self-contained, then articles 8.2 and 8.3 relating to excusable delay show how it could and would be done, with the remedy of reimbursement included in article 8 itself. As it was, the buyer on its submissions wanted to have the reference in article 8.4 to be to article 9.3, but it wanted to take the benefit of article 9.3 without the burden of article 9.2: even though article 9.3 itself stated that its operation depended on "termination…pursuant to and in accordance with this Article 9". As for the argument that the article 9.2 requirement of a further notice is uncommercial and productive of uncertainty, there is nothing uncommercial about a notice giving a grace period of 10 days to correct the failure to tender the aircraft. The failure to tender by the contractual readiness date is a once and for all breach, which is either cured or not within the 10 day period. There can be no further uncertainty. But even if there could be, article 9.2 is a general provision which extends to breach of any material term, and any consequential uncertainty of its operation has inevitably to be lived with.

The judgment below

22. The judge formulated his conclusion as follows:

"[28] I prefer Bombardier's submissions on the construction question to those of Gesner. I reject the contention that the effect of article 8.4 is that after the 90 day period has expired, the buyer may terminate without more. In my view, the words "…then Buyer shall have the right to terminate this Agreement pursuant to Article 9" mean that Gesner's righ to terminate arose pursuant to article 9, which entailed the exercise of its right in accordance with the procedure set out in article 9.2. It is not suggested that there is any other applicable procedure in article 9. I see no reason to adopt a construction that encompasses the reimbursement provisions in article 9.3 alone. It is true that this construction produces the result that there is potentially a period during which liquidated damages are not payable, whereas Gesner's construction avoids that outcome. But I do not think it thereby flouts business common sense. In a finely balanced contract for the construction and sale of an aircraft, it is (in my judgment) what the parties agreed. I agree with Mr Pushpinder Saini QC for Bombadier that where the language used by the parties is relatively clear, the court should be cautious of being led into an inquiry as to the commerciality of the transaction."

23. It was perhaps for the reason expressed in that last sentence that the judge did not seek to resolve the competing submissions as to how the provisions of article 9.2 would operate in the case of a 90 day non-excusable delay in the tender of the aircraft for inspection.

Discussion

24. The principles of construction are not in dispute. Out of what might have been an abundance of possible citations, I can describe the competing approaches of the parties to the jurisprudence by citing one passage supported by each party. Thus Mr Phillips referred us to what Lord Bridge said in Mitsui Construction Co v. A-G of Hong Kong (1986) 33 BLR 1 at 14:

"It is obvious that this is a badly drafted contract. This of course, affords no reason to depart from the fundamental rule of construction of contractual documents that the intention of the parties must be ascertained from the language they have used interpreted in the light of the relevant factual situation in which the contract was made. But the poorer the quality of the drafting, the less willing any court should be driven by semantic niceties to attribute to the parties an improbable and un-businesslike intention, if the language used, whatever it may lack in precision, is reasonably capable of an interpretation which attributes to the parties an intention to make provision for contingencies inherent in the work contracted for on a sensible and businesslike basis."

25. On the other hand, Mr Saini referred us to what Patten LJ cautioned in Kookmin Bank v. Rainy Sky [2010] EWCA Civ 582, [2011] 1 All ER (Comm) 18:

"41…But, read in its context, the dictum in The Antaios provides no support for the reformulation by the court of contractual provisions which are relatively clear in their meaning simply because they balance the interests and obligations of the parties in a way which the judge considers to be one-sided or unfair. The starting point has to be that commercial parties can look after themselves and are sufficiently organised and well advised as to be able to ensure that the contractual documents which they sign accurately reflect their intentions.

42. In this case (as in most others) the court is not privy to the negotiations between the parties or to the commercial and other pressures which may have dictated the balance of interests which the contract strikes. Unless the most natural meaning of the words produces a result which is so extreme as to suggest that it was unintended, the court has no alternative but to give effect to its terms. To do otherwise would be to risk imposing obligations on one or other party which they were never willing to assume and in circumstances which amount to no more than guesswork on the part of the court."

26. It does seem that ours is a poorly drafted and, it might be said, poorly reasoned contract in these relevant respects. Thus article 8.4 says that during the 90 day period in which liquidated damages accrue "Buyer shall not have the right to terminate this Agreement pursuant to Article 9". Read literally, that might mean that the Buyer could not terminate the contract during that period pursuant to article 9.1 (in the event of insolvency and so on). However, why should the seller continue to be able to terminate pursuant to article 9.1, but not the buyer, a fortiori when the seller is in breach? It makes no sense, and the parties were agreed that "pursuant to article 9" could not be intended to encompass article 9.1. Another example is the erroneous reference to "Excusable Delay" in article 9.3 rather than "Non-Excusable Delay", as the judge concluded the clause should have read.
27. On the other hand article 8.4 is clearly a favourable term so far as the seller is concerned. Ex hypothesi it is talking about non-excusable delay resulting in a breach on the part of the seller in failing to tender the aircraft by the readiness date. Liquidated damages are available, but only for 90 days, and only if the contract is not terminated. Upon termination after 90 days (however that is to be effected), the liquidated damages are foregone by the buyer. Moreover, the buyer gets no remedy apart from his money back with interest (save for the right to agree a new readiness date). The buyer was entitled to the reimbursement remedy for termination after 3 months of excusable delay, in the absence of a breach (or at the very least the breach is excused), without any need to grant further periods of grace. This is all highly favourable to a seller who is effectively in fundamental repudiation of his contract after a lengthy period of non-excusable delay.
28. Therefore, although there is force, from the point of view of a rational scheme of things, in the buyer's submission that the simple procedure (of a terminating notice) provided in the case of 3 months' of excusable delay should at the very least be expected to be available in the case of 90 days of non-excusable delay, commercial rationality and fairness do not easily or necessarily square with a provision which is intended to favour a defaulting seller. In such a situation it seems to me that the court should be particularly careful about seeking to impose its own ideas of fairness on a commercial contract between parties of equal bargaining power.
29. There is also force in Mr Phillips' submission that the article 9.2 procedure operates uncommercially in the case of a 90 day non-excusable delay in tendering the aircraft for inspection. As stated above, it seems strange that after 90 days of non-excusable delay beyond the agreed readiness date, the buyer has to go through a further procedure of specifying a well-known breach, for by definition there has been no tender of the aircraft, granting a further 10 days of grace on top of the 90 days already accumulated to allow the seller to "act to cure" the default (which he might already be doing, but unsuccessfully), and running the risk of a further uncertain and indefinite period of delay while the seller tries, however conscientiously, to put the aircraft into a deliverable state, while all the time the buyer is being left without any remedy for the further delay.
30. Mr Saini seeks to take the sting out of this dilemma by his submission that in effect, in this situation, the seller either tenders the aircraft within the extra ten days or not, and there is no further leeway. That has a superficial attraction, but the matter is not free of difficulty. The obligation in question is not merely to tender the aircraft for inspection, I agree that can be done, or can fail to be done, once and for all within the ten days, but to tender an aircraft that is ready and compliant with specification. What then is the position where the aircraft is tendered within the 10 days, but is defective in material ways, and not merely by reason of "snags" or "squawks" (see the last sentence of article 8.4)? It would seem that the contract contemplates that there is then a (further) period of non-excusable delay while the defects are corrected. However, it might be said that the tender of a materially non-compliant aircraft is not a valid tender at all: and that would leave the question whether, although the seller had (I will assume in good faith) acted to cure his failure to tender the aircraft in time within the relevant ten days of grace by tendering the aircraft, nevertheless he had not as yet succeeded in correcting or curing the complained of default or breach, but was still continuing thereafter (I will assume diligently) to correct or cure the breach. After all, article 8.4 begins with the general words "In the event the Aircraft is not ready for Buyer's inspection and acceptance within the period stated in Article 2.2". I do not think that is simply the same as saying "If the aircraft has not been tendered for inspection" by the readiness day, even if I may have used that gloss or label at times to describe the article 2.2 obligation, which is more strictly to have the aircraft "ready for inspection and acceptance" by the stated date. I do not think that the parties' submissions really got to the bottom of such problems.
31. Nevertheless, these problems are endemic in the provisions of article 9.2 itself, a provision which has certainly been agreed by the parties for better or worse. Where a material defect occurs for the first time upon tender of the aircraft, which the seller is obliged to remedy (see article 5.3), then, even if the readiness date has not yet come and gone, there may straightway be a right to terminate under article 9.2 by serving a notice specifying the defects, and if the seller does not "act to cure" the specified defects within the ten days of grace or if he fails thereafter to continue diligently to correct or cure the defects, then the buyer may be able to terminate whether or not there have been 90 days of non-excusable delay. So the uncertainty engendered by this language has the potential to cause its difficulties in any event. Where there have been, say, 20 days of non-excusable delay before tender of the aircraft and then the aircraft upon inspection is found to be materially defective, the problems involved in the article 9.2 procedure again have to be faced. There might be 80 days of non-excusable delay before tender, and then the aircraft is inspected and found to be materially defective. An article 9.2 notice can perhaps be served immediately, specifying the material defects. However, an article 8.4 termination right has not yet arisen, but it might be said to do so ten days later, if the defects have not yet been cured. In such a situation, the question of the article 9.2 notice served after 80 days, specifying the defects found on tender, becomes bound up in the article 8.4 question. What happens at the end of 90 days of non-excusable delay, with the aircraft still "not ready for Buyer's inspection and acceptance"?
32. One possible consideration might be that, because of article 9.2's "subject to Article 8.4", the article 9.2 right to terminate cannot in any event be exercised until there have been 90 days of non-excusable delay within article 8.4, and that for these purposes the tender of a materially defective aircraft is a situation within article 8.4 (see again its last sentence). That would answer some of the questions posed above, but not the problem where 80 days of such delay are followed by further delay after first inspection, amounting in all to more than 90 days. Again, these problems remain unresolved on the parties' submissions.
33. In these circumstances, I think that the alleged commercial unreality and uncertainty of the article 9.2 provision have to be faced in any event. It is there in article 9.2, and different situations may set out some uncomfortable questions for solution. This becomes therefore a most uncertain basis upon which to demand that what might otherwise be reasonably clear contractual language should be reformulated or glossed. In the present case of course no problem arises from delay caused by material defects found upon first inspection.
34. The fact remains that the language of article 8.4 is reasonably clear. During the 90 days of non-excusable delay, "Buyer shall not have the right to terminate this Agreement pursuant to Article 9". What is that "right to terminate"? It is common ground that it is not the right to terminate within article 9.1. The explanation for that might be that article 9.1 is not so much a buyer's right to terminate, as a mutual right to terminate ("Either party may terminate…"). However, once article 9.1 is out of the picture, the only buyer's "right to terminate" to be found in article 9 is in article 9.2 (which begins "Buyer may terminate…"). Article 9.3 does not contain a right to terminate, but describes the consequences of such a right. Moreover, those consequences depend on "termination of this Agreement by Buyer pursuant to and in accordance with this Article 9". That takes one back again to article 9.2. And article 9.2 takes one back to article 8.4, because it is "subject to Article 8.4". It seems to me that Mr Saini is right to submit that Mr Phillips wants to pick and choose the language in article 9 to which article 8.4 gives effect, or to "approbate and reprobate" article 9. Mr Phillips does not even want the whole of article 9.3. He has to jettison the words "pursuant to and in accordance with this Article 9".
35. In effect, the buyer's argument concentrates on the place in article 8.4 where article 9 is mentioned for the second time in the words "after 90 days of Non-Excusable Delay, then Buyer shall have the right to terminate this Agreement pursuant to Article 9". Mr Phillips submits that this means "then Buyer shall have the right to terminate with the consequences set out in article 9.3". However, this gloss is not merely something that the contractual text does not say; and it is not merely something which the text could easily have said in terms (see articles 8.2 and 8.3 which set out the reimbursement consequences); but it fits uneasily with the first appearance of the words "Buyer shall not have the right to terminate this Agreement pursuant to Article 9": for the natural effect of those words sends one to look for a right to terminate within article 9, not for the article 9 consequences of a right to terminate within article 8.4. That is a serious impediment to the buyer's submission of a free-standing right to terminate within article 8.4.
36. The next major impediment to such a free-standing right is the absence in article 8.4 of any words which tell the reader how that free-standing right is to be operated. Article 9.2 supplies the procedure, it is by "written notice from Buyer specifying such default or breach". Moreover every other right to terminate specifies the manner of operating such a right, viz by written notice: see articles 8.2, 8.3, and 9.1.
37. Similarly, article 15.6 gives the buyer "the right to terminate this Agreement pursuant to Article 9": there again, that naturally reads as a reference to the article 9.2 right to terminate, with its built-in procedure, rather than a mere reference to the reimbursement consequences of article 9.3. There is no reason at all why the seller should not be given the opportunity to make good its sound level guarantee.
38. It is true that it is somewhat strange to find that excusable delay of 3 months immediately sets up an independent right to terminate, whereas non-excusable delay of the same period (90 days) only does so subject to the further hurdle of the article 9.2 procedure. However, this could be rationalised on the basis that, since ex hypothesi excusable delay is beyond the reasonable control of the seller, it is somewhat pointless to require a grace period of a further 10 days. Whereas in the case of non-excusable delay, ex hypothesi the seller is regarded as being in control and it is understandable, even if generous, that the buyer is required to mark the importance of no further delay by sending the article 9.2 notice.
39. For all these reasons, attractively as Mr Phillips has put the argument on behalf of the buyer, I consider that the answer to this appeal is to be found essentially in the submissions of Mr Saini and the reasons expressed by the judge.

Conclusion

40. I would therefore dismiss this appeal.

Lord Justice Longmore:

41. It is a curiosity of the Aircraft Purchase Agreement ("the APA") that the consequences of Excusable Delay are spelled out in Articles 8.2 and 8.3 but the consequences of Non-Excusable Delay are not spelled out in the Article (8.4) which only deals with consequences by reference to the Article on Termination (Article 9). A curiosity of the Seller's submissions in this case is that, if there is Non-Excusable Delay on its part, it has a period of grace (which in some circumstances might be indefinite while the Seller attempts to correct or cure its delay), a period of grace which is apparently not available in the case of Excusable Delay and which is not compensatable by liquidated damage. One asks oneself whether the parties could have intended such a curious result.
42. Mr Phillips submits that they did not. The phrase "pursuant to Article 9" in Article 8.4 is, in his view, purely referential in the sense that, since the consequences of Non-Excusable Delay are (for whatever reason) not spelled out in the body of 8.4, there has to be some reference to the Article which does spell out the consequences of such Delay (namely Article 9, which provides for the return of the instalments of the purchase price already paid). The fact that Article 9 (entitled Termination) also contains a general provision entitling the Buyer to terminate the agreement at any time before acceptance, if the Seller is in default or breach of any material term or condition of the Agreement and does not act to cure such default or breach within 10 days of receipt of written notice from the Buyer specifying the default or breach, does not mean that in the particular case of Non-Excusable Delay (which has already lasted 90 days), the Buyer must allow a further 10 day period of grace before he exercises his right of termination. The particular right given by Article 8.4 cannot be intended to be qualified (or conditionally prolonged) by the purely general words of Article 9.2. He might have said the Latin language puts the matter more pithily than English can, by the phrase "Generalia specialibus non derogant".
43. He submitted in the alternative that this was one of those cases like Investors Compensation Scheme v West Bromwich BS [1998] 1 WLR 896 where something had gone wrong with the drafting because the parties could not have meant to bring in the entire consequence of Article 9.2 but only those of 9.3 and that the words pursuant to Article 9.2 clause 8.4 should have read "pursuant to Article 9.3".
44. Forceful as these submissions are, I find them impossible to accept for the reasons set out in paragraphs 34-38 of Rix LJ's judgment. As Rix LJ points out, clause 8.4 is a generous provision in favour of the Seller; it is not therefore completely surprising that its generosity extends to the operation of clause 9.2. It cannot safely be inferred that the parties, while agreeing to be generous to the Seller, could not have intended (in the case of non-excusable delay) the further generosity conferred by clause 9.2.
45. I am, moreover, persuaded that, in cases in which the Buyer relies on a failure to offer the aircraft for inspection at the appropriate time, clause 9.2 must be intended (primarily at any rate) to cover cases of non-excusable delay rather than cases of excusable delay. Any case of excusable delay is almost certainly a case of delay which is beyond the control of the Seller; a terminating Buyer will then be likely to avail himself of the options granted to him in clauses 8.2 or 8.3 and clause 9.2 has no part to play. If it is to have any part to play in the (most common) situation of a failure by the Seller to offer the aircraft for inspection within the time scale agreed in the contract, it can only be in cases where the delay is within his control and it is not unreasonable for the parties to have agreed a short grace period after the expiry of the liquidation damages period of 90 days within which the Seller is to take action to cure the failure to offer the aircraft for inspection. If he cannot do that within 10 days, (and it is unlikely that it will be able to take such action if 90 days have already elapsed), then the curtain falls.
46. I agree this appeal should be dismissed.

Lord Justice Patten :

47. I agree with both judgments.