Uzbekistan Airways v Jetspeed Travel Pte Ltd

• Judge: Andrew Ang J
• Judgment Date: 08 August 2008
• Neutral Citation: [2008] SGHC 138
• Citation: [2008] SGHC 138
• Defendant Counsel: Margaret George (Belinda Ang, Tang & Partners)
• Published date: 27 August 2008
• Plaintiff Counsel: Lim Joo Toon and Joseph Tan (Joo Toon & Co)
• Date: 08 August 2008
• Docket Number: Suit No 340 of 2006
• Court: High Court (Singapore)
• Subject Matter: Airline seeking indemnity from sales agent,Sales agent issuing tickets on fictitious routes including sectors operated by partner airlines,Contractual terms,Rules of construction,Contract,Whether agent liable for full amount airline paid to partners

8 August 2008 Judgment reserved.

Andrew Ang J:

Background facts

1 The plaintiff is an airline owned by the Government of Uzbekistan. In order to increase the number of passengers on its flights, the plaintiff entered into a unilateral interline agreement with British Airways on 1 October 1993 which permitted British Airways to issue tickets for travel on routes operated by the plaintiff. It was only on 1 July 2000 that a bilateral interline agreement was executed whereby the plaintiff was also permitted to issue tickets for passengers to travel on routes operated by British Airways. The plaintiff also had interline agreements with Lufthansa and Air France.

2 The defendant is a travel agent and tour operator registered in Singapore. On 27 April 1999, the plaintiff appointed the defendant as its general sales agent in Singapore by way of a Passenger Sales Agreement (“the Passenger Sales Agreement”). The Passenger Sales Agreement allowed the defendant to issue tickets for flights on routes operated by the plaintiff. Subsequently, the plaintiff and the defendant entered into another agreement dated 29 January 2000 (the “Interline Sales Agreement”) under which the defendant was authorised to issue tickets for flights on airlines with which the plaintiff had an interline agreement. The relevant clauses of the Interline Sales Agreement provided:

3. Jetspeed will account for the tickets issued on 2 separate Sales Reports

(a) Interline Sales inclusive of fare constructions based on prorata basis.

(b) Sales performed on Uzbekistan Airways and with SPAs.

Tickets issued in currencies other than US Dollars are to be converted into US Dollars by applying the applicable exchange rate and accounted for in the Monthly Sales Report.

…

5. Tickets issued Interline Sales are to be issued according to the officially Published routes/fares/rules, which are to be observed by Jetspeed. In order to match the fare levels of the market, Jetspeed will be entitled to achieve fare combinations, not limited to issuing tickets based on SITI instead of SOTO, IATA applicable for tickets issued for transportation on airlines for which Uzbekistan Airways has an Interline Agreement with.

6. Jetspeed Travel will be responsible for under-collections and fare differences arising from tickets issued out of its offices. Uzbekistan Airways will invoice Jetspeed Travel for such differentials and will provide documentary evidence i.e. copy of Interline Billings received to substantiate them.

Complaints concerning the defendant’s incorrect issue of tickets

3 Sometime in 2000, the plaintiff received complaints from Lufthansa, Air France and British Airways regarding the defendant’s alleged incorrect issue of tickets. For example, the defendant commonly issued tickets for travel from Colombo, Sri Lanka to Reykjavik, Iceland, using the following flight route: Colombo-Singapore-London-Reykjavik-London-Singapore-Colombo. In each such case, it turned out that the passenger had really only travelled between Singapore and London and that the flight coupons for the other legs of the journey were unused. Significantly, it would have been impossible for a passenger to complete the route in this example because the plaintiff had no interline agreement with Icelandair who would not have recognised a ticket issued on the plaintiff’s ticket stock for travel in its sectors. The plaintiff then suspended its agency relationship with the defendant on 20 October 2000.

4 In a letter to the plaintiff’s London office dated 5 January 2001, British Airways formally complained that the defendant had extensively issued tickets for its long haul First and Club class services where the passengers did not originate from the points of origin shown on the tickets. Neither did they, in some cases, travel to the stipulated final destination. According to British Airways, the tickets were invariably issued in weak currencies from points to which lower fares would apply thereby reducing the fares charged to the passengers. British Airways ended its letter as follows:

I would emphasise that under the procedures agreed in our Interline Agreement we are entitled in these circumstances to bill Uzbekistan Airways full sector fare for any sector subjected to revenue dilution resulting from this abuse. It could also bring further continuation of our interline agreement into jeopardy. I would be grateful therefore if you will bring the matter to the attention of your head office, in the event that they have for us any alternative explanation for what has taken place.

5 Shortly thereafter, on 10 January 2001, British Airways tendered an invoice to the plaintiff for GBP46,830.45 in respect of flights flown in July 2000 which included an additional charge over and above its pro-rated share of the fare in order to reflect its alleged losses. This invoice was followed by four others, bringing the total billing from British Airways as at 23 May 2001 to GBP269,826.16 in value. I note at this juncture that, despite its key role in the events surrounding the dispute, British Airways was not a party in this case.

6 The plaintiff replied on 28 June 2001 disclaiming responsibility for the defendant’s actions and arguing that the amount invoiced should be calculated on the basis of the normal through applicable fare and not the full sector fare. Under cl 4.1 of the International Air Transport Association (“IATA”) Revenue Accounting Manual, this amounted to a first rejection of British Airways’ original billing. Clause 4.1 of the IATA Revenue Accounting Manual further provided that if British Airways rendered another bill giving reasons for its debit (second rejection), and this was again not accepted by the plaintiff (third rejection), the next step would have been for British Airways to initiate correspondence to negotiate a settlement, failing which it would be bound to accept the amount suggested by the plaintiff in its third rejection.

7 In this particular case, the matter did not progress to the stage of correspondence. After the letter of 28 June 2001, the plaintiff contacted the defendant and a meeting was held between the parties on 14 July 2001. At this meeting, the plaintiff and the defendant entered into a Protocol (“the Protocol”) wherein both sides agreed, inter alia, as follows:

3. The [defendant] will be obliged to cover all under-collection that has arisen as a result of issuing the tickets what become the reason for [the plaintiff’s] interline partners to bill [the plaintiff] using full applicable sector fare which is contrary to IATA rules and regulations. The total amount of claims on July 10, 2001 is 456.233,19 USD. The [defendant] has provided [the plaintiff’s] delegation proof that such tickets have been issued according to IATA fare construction rules and copies of fare calculations were also provided to prove the case. [The plaintiff’s] tickets were issued in accordance to Para 5 of the [Interline Sales Agreement] signed between [the plaintiff] and the [defendant]. The [defendant] acknowledges that it will be responsible to pay the total amount of claims in case of no adjustment between [the plaintiff] and its interline partners which is in accordance to Para 6 of the [Interline Sales Agreement]. The [defendant] suggested to [the plaintiff] that both parties should work together to overcome any unprecedented issues raised by [the plaintiff’s] Interline partners and to overcome all problems together for mutual benefit. [The plaintiff] requested the [defendant] to forward to [the plaintiff’s] Financial Department a letter with supporting documents.

4. The total billed amount from [the plaintiff’s] interline partners for the period from Oct 1999 to Apr 2001 is 418.099,19 USD. The [defendant] is responsible to cover any differences between the amount of remittances regarding sales reports and the amount of billing [the plaintiff] by interline partners; this is in accordance to Para 6 of the said [Interline Sales Agreement]. The [defendant] reminded [the plaintiff’s] delegation that in accordance to local income tax laws, [the plaintiff] will have to provide copies of Interline billing to the [defendant] who will need to have these documents filed substantiate such claims.

[emphasis added]

8 Approximately one month later, on 10 August 2001, British Airways replied to the plaintiff’s letter of 28 June 2001, refusing to accept the plaintiff’s invoices (second rejection) and stating that British Airways was unable to recalculate the value of the disputed flights based upon actual fares as opposed to full sector fares because the journeys were on the plaintiff’s ticket stock and it did not have the complete information regarding the actual journeys flown. British Airways requested that any further rejection be supported with system information or copies of the Passenger Name Records (“PNR”) to prove the actual journeys travelled. It further took the position that the plaintiff was fully responsible for the actions of its agent. Sometime later, British Airways sent another two invoices to the plaintiff.

9 The plaintiff then entered into a settlement with British Airways in the amount of GBP272,928.07 as evidenced by a letter the plaintiff sent the defendant dated 30 October 2001 requiring the defendant, in accordance with cll 3 and 4 of the Protocol, to transfer the said sum to the plaintiff.

10 However, after discovering arithmetical errors in British Airways’ calculation, the plaintiff issued a partial third rejection to British Airways, agreeing to pay its invoices subject to deduction of GBP9,744.55. That settled the matter between the plaintiff and British Airways. Ultimately, the total sum invoiced by British Airways totalled GBP549,781.44 of which GBP270,310.73 represented the additional charges for British Airways’ alleged losses. The plaintiff later conceded that the defendant was not liable for part of this amount because three of the tickets referred to in the...