Legal update: Administrators’ efforts to realise Monarch’s assets boosted by judicial review victory

12 January 2018

In the recent case of R (Monarch Airlines Limited (in administration)) v Airport Coordination Limited [2017] EWCA Civ 1892, the Court of Appeal considered whether an airline that had fallen into administration could still be allocated valuable slots at airports.

Airport Coordination Limited (“ACL”) is the coordinator for, among others, Luton and Gatwick airports. It is responsible for allocating airport infrastructure for the purposes of take-off, landing and passenger/baggage embarkation and disembarkation (“Slots”). Council Regulation (EEC) No 95/93 of 18 January 1993 lays down common EU rules for the allocation of Slots at airports (“the Slots Regulation”). Slots are allocated to airlines twice a year, for the winter and summer seasons. If an applicant can demonstrate that it used at least 80% of its Slots in a particular season, it will typically be able to claim them again the following year.

Monarch Airlines (“Monarch”) applied for Slots in the summer 2018 season on 26 and 27 September 2017. Monarch had a strong case for allocation because it had held equivalent Slots in the summer 2017 season. However, Monarch went into administration at the beginning of October 2017, before ACL had allocated the summer 2018 Slots, and this put Monarch’s eligibility to claim Slots in doubt.     

Once it was in administration, Monarch did not pretend that it would use the Slots itself, but instead wished to exchange the Slots with other airlines for their far less valuable Slots and receive payment reflecting the difference in worth, and doing so would achieve a better result for Monarch’s administrators who were keen to realise every asset. Slots cannot be sold outright but can be exchanged in this manner.  

Instead of granting Monarch the Slots it had applied for, ACL decided to reserve the Slots pending the outcome of a Civil Aviation Authority (“CAA”) process that had been triggered by the administration. This process had the potential to lead to the revocation of Monarch’s operating licence, leaving it ineligible for Slots. Monarch issued a judicial review challenge to ACL’s decision. The Divisional Court sided with ACL but the Court of Appeal reversed this decision and sided with Monarch.

In considering Monarch’s challenge, the Courts accepted that if Monarch no longer met the definition of an “air carrier”, it would be ineligible for Slots. Under article 2(f)(i) of the Slots Regulation, “‘air carrier’ shall mean an air transport undertaking holding a valid operating licence or equivalent at the latest on 31 January for the following summer season”. The two key questions to be determined were, therefore, whether Monarch still held a valid operating licence and whether it was still an “air transport undertaking”.

Did Monarch have a valid operating licence?

Under article 9 of Regulation (EC) No 1008/2008 of the European Parliament and of the Council of 24 September 2008, a competent licensing authority, which in the UK is the CAA, may revoke or suspend a carriers operating licence in the event that it falls into sufficient financial difficulty.  

On 2 October 2017, the CAA provisionally suspended Monarch’s operating licence and proposed to revoke or suspend it. Soon afterwards, it indicated that revocation was likely on the basis that Monarch no longer employed any active/serving pilots and the leases for all its aircraft had been terminated, apparently leaving Monarch unable to resume air transport services.

Under CAA procedures, revocation or suspension would not occur until after due consideration of the case and any representations by Monarch (as licence holder). The CAA would then have to notify Monarch of its intention, and the revocation or suspension would only take effect following the determination or abandonment of any appeal. This internal appeals process was the saving grace for Monarch, as at the time ACL was obliged to inform airlines of their Slot allocation, Monarch still held a valid operating licence. The Courts held that it had not, therefore, ceased to be an “air carrier” due to loss of its operating licence.  

Meaning of “air transport undertaking”

Under article 2(f)(i) of the Slots Regulation, an “air carrier” must be an “air transport undertaking” - a term for which there is no definition in the Slots Regulation. The Divisional Court decided that “air transport undertaking” means an undertaking engaged in the provision of air transport. Since the possibility that Monarch would resume air transport was purely theoretical in its view, the Divisional Court decided that Monarch was no longer an “air carrier” and was therefore ineligible for Slots.

The Court of Appeal, however, interpreted the meaning of “air transport undertaking” differently, finding that: “It cannot be supposed that an undertaking inevitably ceases to be an “air carrier” for the purposes of the Slots Regulation whenever, and as soon as, it becomes unable to operate air transport services”. In the Court’s view, even a failed air transport undertaking with no prospect of resuming air transport services could still meet the definition.  

The Court of Appeal reached this conclusion having considered the practical nature of ACL’s functions. It concluded there was a compelling case that matters relating to an understanding of an airline’s financial circumstances and ability to continue business were best left to, and were intended to be left to, the licensing process rather than the Slot allocation process. The Court was concerned that if it accepted the Divisional Court’s interpretation of “air transport undertaking”, ACL would be obliged to undertake a detailed and almost forensic analysis of whether an insolvent company (which could be based in, and governed by insolvency laws in any jurisdiction) would have a realistic prospect of recovery following administration. This was not an analysis ACL could reasonably be expected to undertake as part of the Slot allocation process, or one which the Slots Regulation or case law indicated it should undertake, especially given that the speed of Slot allocation/re-allocation is critical. The Court of Appeal emphasised that if the Slots Regulation was intended to confer such functions on coordinators such as ACL, it would have said so explicitly.

Conclusion

The Court of Appeal concluded that Monarch was still an “air carrier” at the time Slots were allocated and was therefore entitled to the 2018 summer season Slots it had claimed. This decision is important for the administration of Monarch, which may now potentially realise tens of millions more for the airline’s creditors. It is also a reminder that two experienced courts may differ on crucial questions of legislative interpretation according to the weight they each attribute to the purpose of particular legislative provisions and the practical consequences they see flowing from different readings of them.

 

By Cyrus Sabourian, Paralegal, with input from Nick Wrightson, Senior Associate.

Latest blogs & news

Case Note – challenging the Court’s jurisdiction in judicial review proceedings: R (Girgis) v Joint Committee on Intercollegiate Examinations [2021] EWHC 2256 (Admin)

The Administrative Court of England & Wales has recently considered a challenge to its jurisdiction to hear a judicial review claim on the basis (asserted by the defendant) that the claim should be heard at the Court of Session in Scotland. As explained below, the challenge was unsuccessful, but the case is interesting not just because of the Court’s conclusion on the substantive issue but also because of His Honour Judge Simon’s approach to the “technical” (procedural) issues the case gave rise to.

New guidance encourages judicial review practitioners to be concise, succinct and prepared

Earlier this year, changes to Practice Direction 54A (covering judicial review) and 54B (covering urgent applications) came into effect. This blog will consider the impact that the changes have had on the procedure for judicial review, before turning to a recent example of the perils of failing to follow the rules.

Can you devise an effective ouster clause to exclude a category of decision making from judicial review?

The Judicial Review and Courts Bill contains a new ‘ouster clause’ designed to prevent judicial review of the Upper Tribunal’s decisions on certain applications for permission to appeal against decisions of the First-Tier Tribunal. This blog explores why drafting legislation to restrict judicial review is so difficult.

The UK Supreme Court has confirmed the principles for judicial review of policies

R (A) v Secretary of State for the Home Department [2021] UKSC 37 and R (BF (Eritrea) v Secretary of State for the Home Department [2021] UKSC 38

Two linked Supreme Court judgments provide a reminder to claimants that challenges to policies should focus on whether the policies authorise or approve violations of the law. The court acknowledges that policies are issued to promote practical objectives and the standards set for reviewing them must not be unduly demanding.

Judicial Review Reform – waiting for the sting

Long awaited reforms to judicial review were revealed yesterday by Robert Buckland in his Judicial Review and Courts Bill. Thankfully the proposals to suspend quashing orders and limit their retrospective effect retain all-important judicial discretion and, at face value, are milder than feared. However, the decision to exclude the review of Upper Tribunal permission-to-appeal decisions (so called “Cart JRs”) is more troubling, marking the return of ouster clauses and possibly setting the groundwork for the removal of the jurisdiction of the Administrative Court in future legislation.

Government Launches Public Consultation on Reforms to Judicial Review

On 18 March 2021 the government published the Independent Review of Administrative Law (IRAL) and began a public consultation on reforms to judicial review. This blog provides some initial thoughts on these important developments. For background on the IRAL see our introductory blog here.

Supreme Court rules that Nigerian communities can have their case against Shell heard in the English courts

This morning (12 February 2021) the UK Supreme Court handed down judgment in Okpabi & others v Royal Dutch Shell (“Okpabi”), a case concerning mass oil pollution in the Niger Delta. Judgment is in favour of the claimants, communities representing over 40,000 affected citizens of Nigeria, whose claim against oil conglomerate Shell and its Nigerian subsidiary can now be heard in the English courts.

Striking a balance or tipping the scales? The Independent Review of Administrative Law and the possible reform of Judicial Review

On 31 July 2020 the Government launched an Independent Review of Administrative Law (‘the Review’). The panel of lawyers and academics, chaired by former Minister of State for Civil Justice Lord Edward Faulks QC (‘the Panel’), has been tasked with examining the potential need for reform of Judicial Review and to ‘consider whether the right balance is being struck between the rights of citizens to challenge executive decisions and the need for effective and efficient government.’

Office for Students refusal to register higher education provider unlawful due to failure to delegate and ‘secret policy’

The Bloomsbury Institute was fighting to survive financially after the Office for Students refused its application for registration. It brought a judicial review challenge which revealed that an unpublished policy had been followed. The policy had been formulated by an official who did not have the power to make the relevant decisions.

International Court of Justice and UN General Assembly do not alter the outcome of the Chagos Islands challenge

In a February 2019 Advisory Opinion, the International Court of Justice stated that, under international law, the decolonisation of Mauritius by the UK has never been lawfully completed and the UK must therefore “end its administration” of the Chagos islands.

Voter ID laws and the way courts interpret legislation

Interpreting legislation is both an art and a science. This recent Court of Appeal case illustrates how judges do it in the context of the statutory scheme used to introduce controversial voter ID pilot schemes.

The High Court confirms that unincorporated associations may participate in both judicial review claims and statutory challenges

Even if it is generally more straightforward for the claimant to be a legal person, this judgment may give confidence to the likes of amateur sports clubs and campaigning pressure groups considering challenging the exercise of public power.

What does the new government mean for public lawyers?

Friday 13 December 2019 will be remembered as the day the Conservatives won their biggest majority since the 1980s and finally obtained the dominance required to complete the Article 50 process and take the UK out of the EU. 

Enemies of the constitution? The words of those attacking independent judges are corrosive and wrong

Everyone has an opinion on yesterday’s decision of the UK Supreme Court. Boris Johnson said on television that he profoundly disagreed with it. Jacob Rees-Mogg reportedly called it a ‘constitutional coup’ on a cabinet conference call. Former Lord Chancellor Michael Gove was distinctly equivocal about it when interviewed on the Today programme. Laura Kuenssberg reported on Twitter that a No 10 source said ‘the Supreme Court is wrong and has made a serious mistake in extending its reach into these political matters’. The fact these people all claim they will still ‘respect’ the decision does not detract from the corrosiveness of their sentiments.

Since prorogation ‘never happened’ what happens next?

The prorogation judicial reviews concerned the constitutional equilibrium between government, parliament and the courts. Today, an 11 member UK Supreme Court panel affirmed its centuries-old supervisory jurisdiction over acts of government and ruled unanimously that Boris Johnson’s government failed to advance any reasonable justification for proroguing parliament. The prorogation was therefore unlawful and ‘never happened’ so parliament is back in the game.

When politics and law collide: The prorogation judicial reviews

Scotland’s highest court and a senior divisional court of the High Court in England and Wales have reached opposite conclusions about whether the recent decision to prorogue parliament was lawful.

“WhatsApp” with Dominic Grieve’s motion for Brexit communications?

Monday night’s marathon session in Parliament saw a number of issues debated into the small hours and further defeats for the government. While many raised important political and legal issues, one of particular interest to information lawyers, followers of Parliamentary procedure and journalists alike was the endorsement of a “Humble Address” motion brought by former Attorney General, Dominic Grieve.

High Court finds Mayor’s Congestion Charge decision did not involve unlawful discrimination

On 24 July 2019, the High Court handed down judgment in R (on the application of Independent Workers Union Of Great Britain and others) v Mayor Of London [2019] EWHC 1997 (Admin). This case related to the decision in December 2018 by the Mayor of London to remove an exemption and require private hire vehicles (“PHV”) to pay the Congestion Charge from 8 April 2019

 

London Climate Action Week: Saving Londoners from nitrogen dioxide, one judicial review at a time

According to the most recent data, two million people in London are living with illegal levels of air pollution. Nitrogen dioxide is one of the main pollutants and road transport is estimated to be responsible for 50% of total emissions.

KN Green Week: Can law help save the world?

We have seen in recent months various and different attempts by those who want to change the course of government policy on the issue of climate change.

Share insightLinkedIn Twitter Facebook Email to a friend Print

Email this page to a friend

We welcome views and opinions about the issues raised in this blog. Should you require specific advice in relation to personal circumstances, please use the form on the contact page.

Leave a comment

You may also be interested in:

Close Load more

Skip to content Home About Us Insights Services Contact Accessibility