Appeal Court dismisses Airlink’s appeal for SAA millions

South Africa’s Supreme Court of Appeal has dismissed with costs a claim by Airlink (South Africa) (4Z, Johannesburg O.R. Tambo) to claw back up to ZAR510 million rands (USD33 million) in flown revenue from its former franchise partner South African Airways (SA, Johannesburg O.R. Tambo). The claim relates to money from ticket sales that SAA collected on Airlink’s behalf under the two airlines’ former 23-year long franchise agreement. Under its terms, Airlink tickets were sold and ticketed through SAA’s computer reservations system. SAA collected and temporarily held the funds before paying them over to Airlink in monthly tranches for tickets flown in the preceding month. Airlink, in turn, paid SAA for those services rendered. SAA defaulted on remitting funds to Airlink for tickets flown in November 2019 but owed in December 2019. Shortly after entering business rescue on December 5, 2019, SAA made it clear it would not honour the terms of its agreement with Airlink. SAA’s administrators argued the funds could not be paid over to Airlink as they constituted a pre-commencement debt (debt that preceded commencement of business rescue). This prompted Airlink to terminate the franchise partnership in June 2020. In January 2020, Airlink applied to the Johannesburg High Court for leave to sue the state-owned airline, and for a declaratory order that would compel it to return the money from ticket sales. According to court papers the amount is ZAR430,000,838.80 (USD27,983,015.47), but Airlink disputed this in court, claiming it to be ZAR510 million (USD33 million). The application was dismissed on March 2, 2020, prompting Airlink’s application to the Supreme Court of Appeal, which was dismissed on November 30, 2020. The Supreme Court of Appeal (SCA) upheld the previous High Court finding that Airlink had not made a case for the lifting of the moratorium imposed under South Africa’s Companies Act on legal proceedings against any company in business rescue. The SCA also confirmed the findings by the High Court that there was no agency relationship between Airlink and SAA. It found the two companies were in a mutually supportive relationship. The funds received by SAA were deposited in SAA’s general bank accounts together with its other funds; and not into a special account belonging to Airlink. Airlink in a statement said it would study the latest judgment and consider its options. “While Airlink fully respects the Supreme Court of Appeal’s order dismissing the case, it is nonetheless disappointing and demonstrates that the law is not always just. It has always been Airlink’s firm view that the funds collected by SAA on Airlink’s behalf, was never for SAA to keep or spend. However, SAA has been able to hide behind the legal veil of business rescue, to withhold and consume Airlink’s money, even though it had no legitimate commercial or transactional basis for doing so,” the airline said.