Durham Tees Valley airport wins 4 year legal battle with bmibaby

6.5.2010 (Northern Echo)

by Joe Willis

AN airport is seeking millions in compensation after winning a landmark legal
battle with a budget airline.

Yesterday, the Appeal Court ruled that bmibaby had breached its contract with
Tees Valley Airport when it axed its services from the airport in 2006.

The decision reversed a High Court ruling last year, which found that the terms
of the contract were so vague and uncertain that they were unenforceable.

Three judges sitting at London’s Civil Appeal Court yesterday found bmibaby in
"repudiatory breach" of the contract.*

The court indicated that the damages should reflect the amount of money the airport
would have received had the airline fulfilled the remaining eight years of the

The airport has previously said it lost more than £11.5m in passenger fees, duty
free profits and car parking receipts when bmibaby pulled out.

Lord Justice Toulson said: "The cardinal principle of any assessment of damages
for breach of contract is that the innocent party is entitled to be put in the
same position as he would have been in if the defendant had not broken the contract."

The case will now go back to the High Court for an assessment of the damages.

The airline, which last night vowed to appeal and would therefore not comment,
also faces legal costs likely to exceed £1m.

Peel Airports Group, which owns the airport, said the ruling set a precedent
within the industry and vindicated the three-and-a-half-years of legal action
against the airline.

Neil Pakey, Peel deputy chief executive, said this was the first time a UK airport
had taken an airline to court over its failure to operate services from the site.

He said: "If an airline enters into such a contract, it can’t now simply leave
on a whim.

"As we have now established, such contracts are enforceable by the courts."

The court heard the deal with bmibaby was backed up by funding guarantees, both
from the airport and local authorities who were keen to support bmibaby’s project
to "promote the region".

The airline was even granted its wish to see the name of the airport – originally
Teesside International Airport – changed to include a city for marketing reasons.

However, bmibaby made heavy losses on its operations at the airport and predicted
that it would lose £3.2m in 2006 and £2.5m in 2007.

Mark Brealey QC, for Peel, said bmibaby pulled out after the newly-appointed
managing director, Crawford Rix, "formed the view that the company had spread
itself too thin and should focus on fewer bases".


link to article


*   in Contract Law:  

Term: repudiatory breach

A repudiatory breach of contract is a breach of contract that goes to the very
root of the contract,  evidences intention on the part of the party in breach that
they no longer intend to be bound by an essential term of the contract.

Breach of a fundamental term in this way entitles the innocent party to accept
the breach of contract (that is the repudiation of the contract) and bring the
contract to end, or alternately affirm the contract.

If the innocent party wishes to accept the breach and terminate the contract,
they must do so unequivocally and without undue delay. Delay in its own right
is not fatal, provided the innocent party does not do anything to affirm the contract
in the interim, and it is prudent to put it on the record that the innocent party
objects to the conduct.”