The High Court approved the repudiation of contracts involving Norwegian Air Shuttle and related companies, after three groups of finance parties opposed the applications. It also ruled that the counterparties’ losses should be determined at a court hearing under section 537(3) of the Companies Act 2014. The parties later agreed the amounts, and the hearing date was vacated.
Mr Justice Quinn’s judgment, delivered on 21 April 2021, explains orders he had made on 5 March. The applications arose during examinership proceedings for five Irish companies in the Norwegian Group and their related company, Norwegian Air Shuttle ASA. The companies sought approval to repudiate contracts as part of a restructuring plan focused on short haul operations in the Nordic countries and a smaller fleet. They said the contracts were no longer needed or were too costly for the planned business.
The applications initially covered about 425 contracts with 68 counterparties. Many were settled, withdrawn or unopposed. The contested matters concerned Credit Agricole, Bank of Utah and Citibank, and PK Air Finance. They included aircraft subleases and guarantees given by Norwegian Air Shuttle or Arctic Aviation Assets for obligations associated with aircraft held by subsidiaries outside the examinership. One of the three aircraft matters involving PK Air Finance had been resolved and withdrawn.
The judge found the contracts met section 537’s threshold because they included obligations beyond payment. He concluded that the companies had shown repudiation was necessary to support the proposed restructuring and survival of the companies, and that no evidence showed the contracts had been selected for an improper purpose. He approved the remaining repudiations, finding no case-specific reason to refuse approval for the three opposing groups.
The judgment also addressed aircraft liens raised in the PK Air Finance dispute. The evidence was limited and the parties disagreed about the aircraft’s status. The companies said the aircraft could be released, but Lufthansa facilities were exercising liens for work on engines. The judge held that those liens did not justify refusing approval. The court could not impose terms on the excluded subsidiaries, which were not before it, and the lessors’ repossession remedies were not stayed. Any additional repossession costs, including payments to lienholders, could be considered when assessing losses.
The companies proposed having an expert determine disputed losses through the scheme process. The judge rejected that approach for these counterparties in this case, while noting expert determination may be suitable in other cases. He directed that damages be assessed at a section 537(3) hearing. The parties then agreed the quantum, so the scheduled hearing was vacated.