Court of Appeal clarifies mortgagee’s duties in aircraft finance case

Court of Appeal clarifies mortgagee’s duties in aircraft finance case
 Banking & Finance analysis: What are the duties owed by a mortgagee in possession? David Bowden, independent legal consultant, comments on the consequences of Alpstream AG and others v PK Airfinance Sarl and another and talks to Elaine Skittrell, a barrister specialising in financial services at 1 Gray’s Inn Square Chambers, about what lessons can be learned from this case.

Original news

Alpstream AG and others v PK Airfinance Sarl and another [2015] EWCA Civ 1318, [2016] All ER (D) 05 (Jan)

The Court of Appeal has overturned the ruling of the Commercial Court and clarified the duties owed by a mortgagee in possession. The Court of Appeal held that a mortgagee could bid for or buy repossessed property and there was no absolute bar on it doing so. However, a mortgagee continues to owe a duty to obtain the best price reasonably possible and in a sale to self the burden of proof is reversed. Although this was an aircraft finance case the principles laid out by the Court of Appeal are applicable to retail mortgages relating to land.

What were the facts in these cases?

David Bowden (DB): The claimants (Alpstream) were all part of a group, NRC, ultimately based in Russia and controlled by a Mr Lebedev. Alpstream had aviation interests and was directly or indirectly interested in the shares of an Irish company and a Maltese company (the borrowers). PK Finance (a Luxembourg company which provided aviation finance) became part of the General Electric Company in the US as was the second defendant, GECAS (collectively ‘the lenders’). The borrowers borrowed from these lenders moneys for the purchase of seven aircraft (the Blue Wings aircraft).

The first and second claimants were the holding companies of the borrowers and were co-mortgagees to PK Finance of the shares in the borrowers by way of security for the loans. In 2009, three more aircraft (the Caelus

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About the author:

Meet Neil:

1. Banking and finance lawyer with particular experience in asset finance

2. Likes Wales, wine, sport and anything else that means he doesn’t have the time to have to write personal information about himself

3. Thinks the law is a far broader topic than any of his family and friends who do not work in law

Neil specialises in banking and asset finance transactions with a particular emphasis in finance for shipping, aviation and renewable energy, as well as providing corporate transactional support. He trained and qualified at TLT LLP and spent a further four years working as a finance solicitor, acting for borrowers and lenders before joining the Asset Finance team at DLA Piper (UK) LLP.