Aircraft lessors and secured creditors will be required to collect their aircraft and engines from insolvency administrators appointed for airlines, rather than compel redelivery of the equipment, where their leases or security attract the operation of the Convention on International Interests in Mobile Equipment (“Cape Town Convention“).
The Australian High Court has decided, in those circumstances, that aircraft and engines do not need to be redelivered to a lessor or secured creditor on the appointment of an insolvency administrator, despite what the terms of the lease or the security may provide. This is the first decision by a court of ultimate appellate standing in the world on the application of the Cape Town Convention.
In a landmark decision which will have international significance, the High Court of Australia has interpreted the meaning of the obligation to “give possession” in the Cape Town Convention and the associated Protocol.
The decision requires an insolvency administrator to provide an opportunity for the lessor to take possession by making “aircraft objects” (for example, airframes, engines) available for the lessor to assume lawful physical possession.
Whilst the High Court has reached this conclusion in the context of the voluntary administration of the Virgin Australia Group, it has done so on a close analysis of the Cape Town Convention and Protocol. Accordingly, the Court’s conclusion has application to other insolvency administrations of airlines and is not limited to Australia.
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