Construction - Terms

Jet2.com Limited v Blackpool Airport Limited: Court of Appeal, Civil Division (Lord Justices Longmore, Moore-Bick and Lewison): 2 April 2012

The claimant low-cost airline had operated out of a number of domestic airports. The defendant company had owned and operated a commercial airport on the outskirts of Blackpool. The parties had signed a letter agreement that had set out the terms on which the claimant would operate out of Blackpool over the course of the following 15 years. The agreement had provided that the claimant and defendant would co-operate to promote the claimant's low-cost service, and had set out terms on which the defendant would provide ground services and marketing support to the claimant's business.

Further, the agreement provided that the parties would co-operate and use their best endeavours to promote the claimant's services from the airport, and that the defendant would use all reasonable endeavours to provide a cost base that would facilitate the claimant's low-cost pricing. Pursuant to legislation governing the licensing of airports, the defendant had been required to inform the Civil Aviation Authority of its normal opening hours. The defendant had become concerned at additional costs as a result of aircraft movements taking place outside normal opening hours, and accordingly informed the claimant at short notice that it would not accept departures or arrivals scheduled outside normal opening hours.

The claimant issued proceedings seeking damages for breach of contract and a declaration that under the agreement the defendant had been obliged to accept aircraft movements outside normal opening hours. The judge held that a cost base that would facilitate the claimant's low-cost pricing, had meant providing facilities and services that would have enabled low-cost pricing. The judge found that aircraft movements outside normal opening hours had been commonplace and had been supported by evidence. The judge accordingly found that the object to which the parties had been obliged to direct their best endeavours had included securing flexible working hours extending beyond normal working hours.

Further, as to best endeavours, the judge held that the defendant had not had complete freedom to consult its own commercial interest, but that the obligation to exercise best endeavours had had to be judged in the light of events as they had occurred. The judge had accordingly been unwilling to grant a declaration in the terms sought by the claimant, but held that the defendant had been in breach of contract in refusing to handle the claimant's flights outside normal opening hours. The defendant appealed.

The defendant submitted, inter alia: (i) that the two objects identified in the agreement, namely to promote the claimant's low-cost services and the provision of a cost base that would have facilitated the claimant's low-cost pricing, had each lacked definition with the degree of certainty that had enabled the obligation to be enforced; and (ii) that, even if the obligation had been capable of enforcement, it had not obliged the defendant to act contrary to its commercial interests, and had not, therefore, obliged it to accept arrivals and departures of the claimant's aircraft outside normal opening hours. The appeal would be dismissed (Lewison LJ dissenting).

(1) There was an important difference between a clause whose content had been so uncertain that it had been incapable of creating a binding obligation, and a clause that had given rise to a binding obligation, the precise limits of which had been difficult to define in advance but could nonetheless have been given practical content. The obligation to use best endeavours to promote the claimant's business had obliged the defendant to do all that it reasonably could have done to enable that business to succeed and grow, and that object of the best endeavours had not been too uncertain to be capable of giving rise to a legally binding obligation.

The promotion of the claimant's business had extended to keeping the airport open to accommodate flights outside of normal opening hours, subject to any right that the defendant might have had to protect its own financial interests. The promotion of a low-cost airline had not been so vague or elusive an object that the best endeavours obligation assumed by the defendant should have been regarded as unenforceable in law.

Nor had the parties failed to provide criteria by which it had been possible to assess whether best endeavours could have been, or had been, used (see [31], [71] - [73] of the judgment). The judge's decision on that aspect of the matter had accordingly been correct (see [31] of the judgment). Scammell (G) and Nephew Ltd v Ouston [1941] 1 All ER 14 considered; Terrell v Mabie Todd & Co Ltd [1952] 2 TLR 574 considered.

(2) The judge had been right in saying that whether, and it so to what extent, a person who had undertaken to use his best endeavours could have had regard to his own financial interests would be dependant very much on the nature and terms of the contract in question. It would not have been contemplated that the defendant should have been able to restrict the claimant's aircraft movements to normal opening hours simply because the defendant had incurred a loss each time it had been required to accept a movement outside those hours, or because keeping the airport open outside normal hours had proved to have been more expensive than it had expected.

The judge had accordingly been right to have held that the defendant's refusal to accept further aircraft movements outside those hours had involved a breach of contract. There had however been force in the argument that if it were to become clear that the claimant could not have expected to operate a low-cost service from the airport profitably, the defendant would not have been obliged to have incurred further losses in seeking to promote a failing business. Accordingly, given the uncertainty about the future course of events, the judge had also been right not to have granted a declaration in terms that would have rigidly defined the scope of the defendant's obligation for the ensuing 10 years (see [32], [33], [70] and [73] of the judgment).Decision of Judge Mackie QC [2011] 2 All ER (Comm) 988 affirmed.

George Leggatt QC and Michael Bools (instructed by Eversheds LLP) for the claimant; Philip Shepherd QC and Adam Cloherty (instructed by Bird & Bird LLP) for the defendant.