Commercial Disputes Weekly – Issue 20918 June 2024

Aviation – Sanctions
The Court of Appeal has held that a confirming bank under letters of credit issued by a Russian bank was prevented by sanctions from making payments under the letters of credit (“LC”). The LCs had been issued in relation to leases of aircraft to Russian airlines and demands were made under the LCs following the termination of the leases for default in March 2022 following the invasion of Ukraine. The LCs specifically required a demand for the transfer of US dollars to a specified account, therefore a demand in another currency would not be a valid demand. However, the obligation to make payment was only suspended pending applications for licences to make payment. The bank could not rely on US sanctions as a defence to non-payment because they had not made reasonable efforts to obtain a licence from the US authorities.
Celestial Aviation Services Ltd v UniCredit Bank GmbH, London Branch (formerly Unicredit Bank AG, London Branch) [2024] EWCA Civ 628, 11 June 2024

Arbitration
The English Court of Appeal has rejected an appeal by an individual, Mrs Zhang, who gave a personal guarantee in favour of Eternity Sky in relation to a bond issue by a Hong Kong company, CS. CS defaulted under the subscription agreement and Eternity Sky demanded payment from Mrs Zhang. The contracts were governed by Hong Kong Law and arbitration and a Hong Kong-seated tribunal awarded the full amount in Eternity Sky’s favour. They were given permission to enforce it by the English court as Mrs Zhang lived in the UK. The court rejected her argument that the guarantee was unfair under UK consumer regulations on the basis that there was insufficient connection for the UK Consumer Rights Act 2015 (“CRA”) to apply. The Court of Appeal agreed that the CRA did not apply but disagreed with the lower court conclusion that Mrs Zhang had acted as a consumer. Her giving of the guarantee was for business purposes and part of a regular pattern of her signing documents at her husband’s request as part of their business transactions. The court noted however that had the CRA applied, the court would have been required to refuse enforcement of the award on public policy grounds.
Eternity Sky Investments Ltd v Zhang [2024] EWCA Civ 630, 10 June 2024

Damages – Defamation
The Supreme Court has provided guidance on the meaning of section 3(1) of the Defamation Act 1952 which provides that “it shall not be necessary to allege or prove special damage” if the words upon which the action is founded “are calculated to cause pecuniary damage”. It allowed the defendant’s appeal and held that it was an essential part of a claim for malicious falsehood that the defendant knew or should have known that their words were likely to cause the claimant financial loss. The defendant was liable in that scenario, but the claimant needed to prove the amount of their loss to recover more than nominal damages. Compensation for injured feelings could only be recovered if it was a consequence of the significant financial damage. The claimant was only able to recover nominal damages.
Cannell v George [2024] UKSC 19, 12 June 2024

Landlord and Tenant
The Chancery Court has held that a lessor is not entitled to change by renewal a communal central heating and hot water system in a way that it considered reasonable and then connect that new system to individual flats where the result would be an enhanced and different repairing obligation on the lessees. The introduction of the new system would change the repairing covenant because there was now an additional piece of equipment that the lessees would have to repair. This was an additional burden that was not contemplated by the parties when they entered into the lease.
Triplark Ltd v Whale and others [2024] EWHC 1440 (Ch), 12 June 2024

Contract Interpretation
The Court of Appeal has confirmed that the Republic of Argentina were liable to certain investors for €1.3bn in relation to securities that were linked to the Republic’s GDP. The dispute arose in relation to adjustment of the baseline figures for calculating the sums due. Although the Republic’s construction of the wording could reasonably have been intended by the parties, it was contrary to the plain meaning of the words used and there was no evidence of there having been an obvious mistake.
Palladian Partners LP v Argentina [2024] EWCA Civ 641, 12 June 2024

Should you wish to discuss any of these cases in further detail, please speak with a member of our London dispute resolution team below, or your regular contact at Watson Farley & Williams: