Note: To assure payment of its obligations under the International Air Transportation Association Sales Agency Agreement, Ceylinco Investments, Inc. (Travel Agent/Applicant) posted a CAN$ 100,000 standby letter of credit favor of Air India (Carrier/ Beneficiary). The Travel Agent/Applicant issued a number of airline tickets but voided them without cancelling the reservations, enabling passengers to use the tickets. Because the tickets had been declared void, Travel Agent/Applicant did not pay Carrier/Beneficiary but retained fares paid by the travellers.

In 2008, Carrier/Beneficiary ran an internal audit that revealed 62 disputed tickets. Claiming that it was due CAN$ 117,791 for unpaid tickets, Carrier/Beneficiary drew on the standby and was paid. Travel Agent/Applicant then sued Carrier/Beneficiary for wrongfully drawing on the standby. Carrier/ Beneficiary counterclaimed for breach of trust, seeking the balance due on the unpaid tickets.

Concluding that the Travel Agent/Applicant had failed to pay for the tickets, the British Columbia Supreme Court, Butler, J., dismissed the claim of Travel Agent/Applicant and awarded judgment in favor of Carrier/Beneficiary on the counterclaim.

Contrary to Travel Agent/Applicant's argument, the Judge noted that the agreement made Travel Agent/Applicant and its owner a trustee for funds secured. The Judge also characterized Travel Agent/Applicant's practice and that of its owner of issuing tickets and purporting to void them without cancelling the reservations as dishonest and fraudulent.

Travel Agent/Applicant also argued that it was too late for Carrier/Beneficiary to claim that Travel Agent/Applicant owed them for the disputed tickets. However, the court found that Carrier/Beneficiary's claim was brought well within the limitation period.



The views expressed in this Case Summary are those of the Institute of International Banking Law and Practice and not necessarily those of ICC or the other partners in DC-PRO.