Grecoair Inc v Tilling & Ors [2004] EWHC 2851 (Comm)

[2004] EWHC 2851 (Comm)Case No 2000 Folio 1004
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
COMMERCIAL COURT
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 09/12/2004
Before
THE HON. MR JUSTICE LANGLEY
Between
GRECOAIR INCClaimant(1) JOHN TILLINGDefendantsSued on his own behalf and for and on behalf of all underwriters and insurers subscribing to Policy no AV15012934Defendant(2) MICHAEL NOBLEDefendantSued on his own behalf and for and on behalf of all underwriters and insurers subscribing to Policy nos AV1500894 and AD0008210ADefendant(3) ACE INSURANCE SA NVDefendant
Mr P. Shepherd QC (instructed by Messrs Fox Hartley) for ClaimantMr G. Kealey QC and Miss C. Laband (instructed by Beaumont and Son) for DefendantsHearing Hearing dates: 15 th-22 nd November and 6 th December 2004
Approved JudgmentI direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic..............................The Hon. Mr Justice Langley
[1]This claim relates to the insurance of an aircraft. At the material times the claimant company “Grecoair” owned the aircraft which was dry leased by Grecoair to Angola Air Charter Ltda (“AAC”). The aircraft was insured for Hull and Liability All Risks for the periods 1 March 1994 to 31 March 1995 and 1 April 1995 to 29 February 1996 by the National Insurance Company of Angola, shortly described as “ENSA”. The insured was AAC. Grecoair was named as an additional insured.[2]The defendants are the reinsurers of ENSA. For the 1994/5 policy year ENSA was reinsured for hull and liability risks by the second defendant (“the Butler Syndicate”) and others with a deductible each accident of USD 500,000. The deductible was itself reinsured in respect of the hull by the first defendant (“Tilling”) for USD 400,000 excess of USD 100,000. For the 1995/6 policy year ENSA was also reinsured for hull and liability risks by the Butler Syndicate and others with a deductible each accident of USD 500,000. The deductible was reinsured by the third defendant (“Cigna”) for USD 400,000 excess of USD 100,000. The USD 500,000 deductibles in the All Risks reinsurances were not applicable if there was a constructive total loss of the aircraft.[3]The aircraft was an elderly Boeing 707-351C which was first operational in 1964. From 1993 onwards, when it was first leased by Grecoair to AAC, it was used only for cargo. It was leased to AAC by a lease agreement dated 7 October 1993. It is Grecoair’s case that during the term of the lease to AAC the aircraft sustained two accidents, the first in the policy year 1994/5 and the second in the policy year 1995/6. Grecoair claims it was entitled to an indemnity from ENSA and also directly from reinsurers for the damage sustained by the aircraft in each accident.

The Issues for Trial

[4]Grecoair claims directly against reinsurers on two bases. First, it claims that the provisions of the material covers entitle Grecoair to make such a claim and do not require the claims to be made by what might be called the conventional route of a claim against ENSA which then claims against reinsurers. Second, it is alleged that at a meeting held at the offices of the Butler Syndicate in London on 11 March 1997, Maria Cetta, the Director of Claims and Legal Affairs of the managers of the Butler Syndicate, stated that reinsurers were “happy to have the aircraft repaired” by a company called FLS Aerospace Limited and Grecoair accepted that offer in a telephone conversation on 11 March and confirmed it by a fax sent on 13 March.[5]On 16 January 2004, Tomlinson J ordered that two preliminary issues be tried. They are: i) Is [Grecoair] entitled to sue under the contracts of reinsurance and recover damages from the defendants for loss caused by insured perils? ii) Did the defendants or any of them come to an agreement with [Grecoair] on 11 March 1997 so as to bind them contractually to [Grecoair] and if so in what terms?[6]If the defendants succeed on both issues, the claim itself must fail. Otherwise, questions of quantum, breach of policy terms as to airworthiness and notification of claims, and proof of the claims may need to be resolved. The emphasis of Grecoair’s case was upon the second issue.

The Major Players

[7]The President of Grecoair is David Tokoph. Matthew Bolshaw, through his company, acted as an insurance consultant to Grecoair and Mr Tokoph. Both signed two witness statements and gave oral evidence. Both attended the 11 March meeting.[8]ENSA’s insurance brokers, responsible for placing the reinsurance, were “Jardines”. David Adcock, at the time director of Jardines’ Aviation Division, and Jose Gomez da Silva, at the time the managing director of the Division, gave witness statements and oral evidence at the request of the defendants. Michael Noble, the second defendant, was the underwriter of the Butler Syndicate. Maria Cetta is now a partner in Beaumont and Son, the solicitors for the defendants. Mark Gimson was claims manager at Cigna and Paul Phillips claims adjuster for Tilling. All gave witness statements and oral evidence for the defendants. Mr Phillips gave his evidence by ‘video link’ from Bermuda. Vasco de Jesus, head of the Hull Department of ENSA Transport Risks Division, made a statement on which the defendants relied in accordance with the provisions of CPR Part 33.2. John McKay, the managing director of, and Bob Duke, a surveyor and adjuster at Lloyds’ Aviation Limited, also gave statements at the request of the defendants. Lloyd’s Aviation were the loss adjusters appointed by reinsurers to investigate the claims of Grecoair. Both Mr McKay and Mr Duke attended the hearing to give oral evidence. However, Mr Shepherd QC, who appeared for Grecoair, informed the court on the fifth day of the hearing that he no longer wished to cross-examine either of them on their evidence. That evidence therefore stands uncontradicted and unchallenged save (by agreement between counsel) to the extent that Ms Cetta and Mr Adcock were cross-examined about the same matters.[9]Both parties engaged experts on Angolan law to address the question whether a claim by Grecoair against ENSA under the insurance policies would now be time-barred. The experts agreed that such a claim would not be barred.[10]In the course of events three companies were involved in giving estimates for repairs to the aircraft. They can be shortly described and will be referred to as, “Boeing”, “GAMCO” and “FLS”. Grecoair instructed Boeing and GAMCO. The defendants instructed FLS.

The Lease

[11]The Lease agreement dated 7 October 1993 between AAC and Grecoair provided by clause 2.7 that AAC was required to:
“keep in full force and effect … hull, passenger, breach of warranty, war risk and other insurance in such form and substance as satisfactory to Grecoair. Grecoair shall be named as loss payee on Hull insurance …. AAC agree to furnish Grecoair with a certificate of insurance therefore including such insurance carried by AAC which shall include Grecoair as Co-Insured for respective rights and interests under the Aircraft Liability Coverage.”
[12]It was AAC’s responsibility under the lease to maintain the aircraft in accordance with “the FAA Approved Grecoair Inspection Program, appropriate Civil Aviation Authority Regulations, and the manufacturer’s recommendations and specifications.” AAC was responsible for “A”,”B” and “C” checks on the aircraft and was obliged to ensure that upon redelivery of the aircraft it was equipped with the same or equivalent equipment as at commencement of the term of the lease and in airworthy condition “excepting for reasonable wear and tear from ordinary use”. Grecoair was responsible for the costs of “D” checks as they fell due under the inspection program. The checks are of increasing severity with, for example, a ‘C’ check normally being required after 2000 flight hours and a ‘D’ check after 16,000 flight hours or 8 years whichever occurs first. There was evidence that a ‘C’ check would cost an average of about USD 600,000 and a ‘D’ check would cost an average of about USD 1.5m.[13]The commencement date of the agreement was 20 October 1993 and the term was six months with an option to renew which AAC exercised. AAC paid a deposit of USD 200,000, and agreed to pay a “fee” of USD 85,000 a month and USD 375 per block hour with a minimum charge of 150 block hours per month. The minimum sum payable in a year was therefore almost USD 1.7M. The Lease was subject to the law and jurisdiction of El Paso County in Texas.

The Insurance

[14]In Angola all insurance taken out by Angolan companies must be taken out with ENSA. The Hull All Risks ENSA policies for both years were, so far as material, and save for the agreed value of the aircraft, in the same terms. The policies were based on Lloyd’s form AVN 1A. They were subject to a deductible each accident. AAC was the insured.[15]The basic cover provided that:
“The Insurer shall, at his discretion, pay for, replace or make good any loss or accidental damage to the aircraft described in the Declarations resulting from the risks covered ….”
[16]“Wear and tear” and “damage … by something that has a gradual or cumulative effect” were excluded but loss or accidental damage to the aircraft as a consequence of such matters was covered.[17]It was also provided that no repairs should be commenced without the consent of underwriters except in the interests of safety or to prevent further damage or when required by authority.[18]The “Declarations” included amongst the “Clauses Applicable” references to a number of other Lloyd’s forms and the provision that Lloyd’s Aviation Department was “to handle all hull losses hereunder”. The policies also contained a “Cut-Through Clause” in respect of two other aircraft to the effect that in the event of ENSA’s insolvency or the like, reinsurers would make loss payments direct to the financier of those aircraft. With regard to the present aircraft it was expressly provided that:
“the provisions of the lease agreement existing between AAC and Grecoair are included, in accordance with the content of the Airline Finance/Lease Contract Endorsement clause (AVN 67A) attached.”
[19]The ENSA All Risks policies provided for disputes to be subject to arbitration probably, by inference, in Angola. Cover for the deductibles was provided on the same terms as the All Risks policies and was expressly subject to an arbitration clause in accordance with the rules of the (Angolan) National Institute for Arbitration.[20]AVN 67A is the form used to note the insurable interests of “Contract Parties”, such as Lessors, who are “included as Additional Insureds”. An additional premium of $100 was payable to insurers for Grecoair to be an additional insured for its interest as Lessor.

The All Risks Reinsurance

[21]Apart from the reduction in the agreed value of the aircraft (from USD 4.5m to 3.5m) and the size of ENSA’s retentions, the terms of the All Risks Reinsurances were materially the same for the two policy years concerned. The reinsurance was placed for ENSA by Jardines. The “Insured” was AAC “and/or as original”. The “Reinsured” was ENSA. For 1995/6 the “sum insured” was, in the case of Hull Risks, 98.50% of 100% and 99.80% for Liability Risks. ENSA therefore retained only 1.50% of hull risks and 0.2% of Liability Risks. The “Conditions” included: i) The Claims Control Clause “Aviation 41”(Condition 1); ii) A deductible of USD500,000 each accident but excluding constructive total loss (Condition 4); and iii) Additions and deletions, waivers of subrogation … and contractual arrangements as expiring ….(Condition 9).[22]In the 1995/6 policy the “Information” included:
“Original Policy … with: 7. In respect of [the aircraft] agree include provisions of dry lease agreement with Grecoair (as expiry) and in this respect include … AVN 67A …. Grecoair are held harmless in respect of any/all losses of or damage to the aircraft for the duration of the lease ….”
[23]There were 18 numbered items of “Information” altogether. They are plainly, as the introductory words quoted and the colon show, information about the terms of the “Original” or underlying policy whereby ENSA insured AAC and, as an additional insured, Grecoair. They were matters disclosed to reinsurers as material underwriting information.[24]Aviation or AVN 41 provides (in part) that it is a condition precedent to the liability under the reinsurance that:
“(a) no amendment to the terms or conditions or additions to or deletions from the original policy shall be binding upon Reinsurers hereon unless prior agreement has been obtained from the said Reinsurers; (b) the Reinsured shall upon knowledge of any loss … advise the Reinsurers within 72 hours; (c) the Reinsured shall furnish the Reinsurers with all information available respecting such loss … and the Reinsurers shall have the sole right to appoint adjusters, assessors, surveyors and/or lawyers and to control all negotiations, adjustments and settlements in connection with such loss …”
The effect of AVN 41 is that a settlement agreed by reinsurers binds insurers and the assured and insurers as regards reinsurers.

The 1994/5 Deductible Reinsurance

[25]The 1994/5 deductible reinsurance was placed by Jardines for ENSA with Syndicates 340 and 925 (loosely described as “Tilling”). Tilling also had a small line on the 1995/6 All Risks Reinsurance. The “Insured” was AAC “and/or as original.” The “Reinsured” was ENSA. The Sum Insured for each Boeing 707 aircraft was USD 400,000 each accident excess of USD 100,000 each accident. The “Conditions” included “Aviation 41”. The “Information” set out four matters referable to the “original” or underlying ENSA policy, including:
“Information: Original policy … wording with (inter alia): (2) This Policy to follow all the terms and conditions of the Aircraft Hull All Risks Policy.”

The 1995/6 Deductible Reinsurance

[26]The 1995/6 deductible reinsurance was placed by Jardines for ENSA with Cigna. The terms were in all relevant details the same as the 1994/5 deductible reinsurance. Cigna also had a 5% line on the 1995/6 All Risks Reinsurance.

The Certificates of Reinsurance

[27]In October 1993 and April 1995 Jardines provided to Mr Bolshaw on behalf of Grecoair a “Certificate of Reinsurance”. The Certificate certified that reinsurers had, through Jardines “intermediary”, reinsured ENSA in respect of the aircraft in the terms of the reinsurance policies. The Certificate referred to the Lease agreement between Grecoair and AAC and, in 1993, recorded that:
“Reinsurers have agreed to include the insurance requirements of such Agreement in the Policies of Reinsurance in relation to this aircraft, subject to … AVN 67A as attached: Pursuant to the insurance and indemnity requirements of the lease Agreement Reinsurers have agreed to: (a) Hold harmless and waive rights of subrogation against Grecoair in respect of any/all loss or damage to the aircraft for the duration of the lease. (b) USA Jurisdiction Clause.”

Pursuant to the insurance and indemnity requirements of the lease Agreement Reinsurers have agreed to:

[28]In 1995 the wording of the Certificate was:
“The aircraft is the subject of a Dry Lease (“Agreement”) … between Grecoair … and The Insured and Reinsurers have agreed to the following Insurance requirements of the Agreement being included in the Policies of Insurance in relation to the aircraft: 1. Under the Hull All Risks and Hull War Risks Policies: a) Grecoair Inc is included as loss payee. b) Agreement to indemnify and hold harmless Grecoair Inc in respect of any/all loss of or damage to the aircraft for the duration of the lease, but subject always to the policy period of the insurance. …. The original policy has been endorsed with … AVN 67A under which the “Contract Parties” are Grecoair ….” b) Agreement to indemnify and hold harmless Grecoair Inc in respect of any/all loss of or damage to the aircraft for the duration of the lease, but subject always to the policy period of the insurance. …. The original policy has been endorsed with … AVN 67A under which the “Contract Parties” are Grecoair ….”
[29]I have set out the terms of these Certificates at some length because Grecoair rely upon them in support of their case on the first issue. However, in my judgment, they lend no support to that case at all. The Certificates were provided by Jardines (ENSA’s brokers) at ENSA’s request to demonstrate compliance with the provisions of the aircraft Lease. It was not even suggested to Mr Adcock that he was acting for reinsurers in sending the Certificates. The Certificates are not and do not purport to be commitments by reinsurers to Grecoair. They are and purport to be a record of the terms of reinsurers’ commitment to ENSA as reinsured. As Mr da Silva said:
“It is common practice for a certificate of reinsurance to be issued as a means to prove that the underlying insurer has purchased valid reinsurance in the international market.”
[30]Cover notes were sent by Jardines to ENSA in the usual way to record the terms of the reinsurances. No cover notes were sent to Grecoair.

The First Accident

[31]Paragraph 18 of the Amended Particulars of Claim alleges that the first accident was sustained “at Luanda airport on 11 September 1994, while the Aircraft was parked and stationary on the ramp at that Airport, in the course of loading operations which were being carried out with the assistance of a fork lift truck driven by one Mario Antonio Culanda. The fork lift truck was being used to load pallets containing bags of foodstuffs. Each pallet weighed some 3125 kilograms. As the fork lift truck was near to the entrance of the main cargo door on the port side of the Aircraft, the driver of the fork lift truck lifted the load as he neared the aircraft. A large bag fell off the pallet and became stuck under one of the wheels of the fork lift truck. This caused the fork lift truck to tip forward causing the pallet to fall into the aircraft. The pallet slid across the aircraft and struck the starboard side of the fuselage with considerable force.”[32]Paragraph 22 alleges that the first accident caused “substantial damage to the aircraft in the region of the main cargo compartment consisting of ”:
“a. The severing of eight right hand circumferential frames just above the main deck cargo floor at Stringer 17R from station 480 through to 600D. b. The fuselage skin was punctured in 2 places with the skin protruding outwards between station 580 and 600D immediately above Stringer 17R. c. Further damage was suspected to major structural components bearing in mind that such damage had occurred opposite the main cargo door and above the front baggage door into the hold.”
[33]Paragraph 22 is “not admitted” in the Amended Points of Defence of Tilling. Paragraphs 13 and 14 of that pleading state:
“13. Paragraph 18 is not admitted. Further, the damage which is alleged to have been caused by the First Accident is common amongst Boeing 707 aircraft, and is caused by distorted pallets riding over the side guidance rails when the pallet is being loaded. This type of damage can be caused by one accident or by a cumulative effect of several incidents. Given the late notification, set out below, the First Defendant is prejudiced in its ability to investigate the cause of the alleged loss, and reserves the right to plead further once disclosure has been provided of the maintenance history of the Aircraft. Accordingly, the Claimant is required to prove the First Accident and the precise damage that was caused by the First Accident. 14. Further, as the First Accident was notified to the First Defendant after a considerable period of delay, namely in about early February 1996, the First Defendant reserves the right to rely on any defence available to it or ENSA for late notification, once it has seen the 94/95 ENSA Policy.”
[34]There is no evidence about this accident itself. Nor has it been the subject of any agreed or assumed facts for the purposes of the issues to be decided. It is undisputed that notification came very late. Grecoair claim it was notified in October 1995 over a year later and at the same time as the second accident was notified. The aircraft had been operational throughout and whatever damage had been caused had apparently not been thought worthy of repair. If the damage had been caused by “several incidents” of course each incident would have been an accident and the deductible would have applied accordingly.

The Second Accident

[35]Paragraphs 19 and 23 of the Amended Particulars of Claim plead:
“19. On 8 April 1995, while the Second and Third Defendants were on risk, and the Aircraft was being operated by AAC pursuant to the Lease, the Aircraft was stationary at Saurimo Airport Angola. While the Aircraft was parked a truck collided with the aft end of the fuselage causing damage to the Aircraft. The accident occurred shortly after 0845 hours (“the Second Accident”). 23. The Second Accident caused damage to the aft fuselage: a. Skin impact damage was visible at station 1300 to station 1400 left hand lower side. b. There were signs beyond the above areas exhibiting signs of outward stress. c. A skin crack of approximately 3 inches at station 1343 above Stringer 17L indicated that more damage was hidden. d. Permanent wrinkles could be seen extending forward and aft of the impact area. This suggested severe damage to the main rear bulkhead, four secondary rear bulkheads. e. The original skin was punctured profusely in the skin layers between the frames at stations 1300, 1320, 1340, 1360, 1380. f. Four circumferential frames at Stations 1320 to 1380 were severed at or near Stringer 24L. g. All the Stringers in the impact area and forward and aft were distorted and fractured. h. The above damage was suggestive of structural damage caused in other areas.”
[36]Paragraphs 14 and 17 of the Amended Defence of the Second and Third Defendants state that these Paragraphs are “not admitted”. Again there is no evidence about the circumstances of this accident before the court. It was first notified in October 1995 some 6 months after it is said to have occurred. The damage seems to have been the subject of a temporary repair (“sticking a plate over it”) which may have done more harm than good. Once again the aircraft continued in use.[37]When Jardines were informed by ENSA of the claim (or claims) they, by Mr Adcock, notified it to Mr Gimson of Cigna. Mr Gimson agreed that Lloyds Aviation should be instructed to adjust the claim but without prejudice to late notification. Mr Adcock did not formally notify the Hull All Risks underwriters but gave them details of the claim for information only as it seemed unlikely to exceed the USD 500,000 deductible. ENSA reported that the late notification was “because the assured assumed that the costs would fallen (sic) under policy deductible”.

Discovery of the damage

[38]The evidence is that the damage to the aircraft was first noticed by one of Grecoair’s engineers (Daniel Lousberg) on a routine inspection in late August 1995.

The Boeing Inspection and Estimates

[39]Grecoair arranged for Boeing to inspect the aircraft which they did on 29 September 1995 at Luanda. Mr Lousberg accompanied Boeing on the inspection. Neither ENSA nor reinsurers were informed about or aware of the inspection.[40]There are three telex reports from Boeing which refer to this inspection. There is no record of the instructions to Boeing apart from what appears in these reports. The first two reports are dated 12 October 1995 and were sent or delivered by Boeing staff to Mr Lousberg amongst others.[41]The reports were “based on limited access to the aircraft”. One related to a request for “a detailed report of damage to forward body frames opposite of the main deck cargo door”. The terms of the report are reflected in sub-paragraphs a and b of paragraph 22 of the Amended Claim quoted in paragraph 32 above. The report concluded that if those matters were “an indication of the remaining structure we predict the existence of additional significant damage to major structural components”.[42]The second report related to a request for “a detailed report of damage reportedly caused by a ground vehicle impacting the airplane”. The substance of the report, in addition to criticism of the temporary repairs, was similar to the matters alleged in paragraph 23 of the Amended Claim quoted in paragraph 35 above.[43]The third report was apparently dated 19 October. It was written by a Mr Entz of Boeing. It is not clear to whom it was addressed. But Grecoair instructed Boeing, Mr Lousberg was present at Boeing’s inspection and I think it is a fair inference that Grecoair must have seen the report at the time. It included the following:
“The condition of the aircraft in general was found to be lacking in proper maintenance, there was significant lack of corrosion control in evidence. Listed here are some of the discrepancies observed. Along the fuselage belly, the skin exhibited extreme bulging typical of corrosion damage. Body cutouts for antennas and access panels were severely corroded around the periphery. Lower lobe skin lap and circumferential joints showed signs of significant corrosion damage. At STA good on the left hand side at STR 24, there is a 6 inch long crack common to the upper row and 3 inch long crack common to the middle row. Skin and doubler disbond could be seen along the cutouts of the nose landing gear wheelwell, the forward entry door and the lower lobe cargo doors. Local to the aircraft body impact damage, a skin crack approximately 3 inches in length immediately above stringer 17L at STA 1435. The main deck cargo floor was in severe distress, floor panel punctures and seat track damage including seat track lip cracks and corrosion could be seen. All nose landing gear and main landing gear tires were severely worn. Significant corrosion is evident on the ribs and lugs of the nose landing gear. …. Our observations suggest that the structural integrity of the aircraft is compromised. We are also of the opinion that the airplane is also out of compliance with the 707 corrosion protection and control program. Further, the condition of the structure calls into question the aeroplane’s status with regards to the ageing fleet program mandatory inspections and mandatory modifications. We consider the airplane not airworthy in its current state. We strongly recommend that the airplane undergo an inspectionequivalent to that accomplished during a complete D-Check. All damage found needs to be addressed and repaired in accordance with the structural repair manual requirements and/or in accordance with the manufacturer’s or aircraft industry approved repair methods. …. We wish to point out that we are obligated to report to the FAA of an airplane that is operating in a non-airworthy condition. Consequently, we need to know your plan to address the structural integrity of the aircraft prior to further flight of airplane D2-TOR. Should any assistance be required in formulating the necessary repairs, please contact us with a detailed description of the damaged areas and we will provide repair instructions for each area.”
[44]Remarkably, Mr Tokoph said in his witness statement that at this time “the aircraft was in good condition”. Equally remarkably it was flown from Angola to Addis Ababa after Boeing’s inspection.[45]On 23 October, Boeing provided Grecoair with a repair quotation which it described as “general in nature” estimates. Materially the quotation read:
“From what we know, we would expect to have to replace frames or frame sections, skins, stringers and doublers in the damaged areas. We are required under our FAA Repair Station License to completely restore the structural integrity of the area we repair. With this in mind, we anticipate requiring a team of 32 people on site for 30 days. The team would consist of 24 mechanics; 2 manufacturing team capains (sic), 2 Quality Assurance supervisors, 2 tooling and 2 structures engineers. The price to cover such a team is reflected below. On-site Labor and Subsistence: 32 people for 30 days: $2,563,200 Labor and Subsistence for Travel to and from the Repair Site: 32 people for 3 days: 184,320 Round-trip Business Airfares to and from the Repair site: 32 x Approx. $4500 144,000 Preliminary Estimate for Parts and Materials 300,000 Estimate of Freight and Handling for Parts, Materials, Tools and Equipment 120,000 Total $3,311,520”
On-site Labor and Subsistence: 32 people for 30 days: $2,563,200 Labor and Subsistence for Travel to and from the Repair Site: 32 people for 3 days: 184,320 Round-trip Business Airfares to and from the Repair site: 32 x Approx. $4500 144,000 Preliminary Estimate for Parts and Materials 300,000 Estimate of Freight and Handling for Parts, Materials, Tools and Equipment 120,000 Total $3,311,520” Total $3,311,520”

Lloyd’s Aviation Inspection

[46]Mr Duke travelled to Addis Ababa on 27 October 1995 to conduct a preliminary inspection of the aft damage from the second accident which he then understood was the only subject of the claim. Mr Duke concluded that the damage was of a minor nature likely to cost about USD 150,000 to 200,000 to repair. He understood that Ethiopian Airlines were to be contracted by AAC to carry out a ‘C’ check on the aircraft.[47]Also on 27 October, Mr Tokoph sent a fax addressed to Mr Duke in London and copied to Mr Adcock in which he wrote that, as Mr Duke “was aware”, Boeing had provided a repair estimate of USD 3.3m and “experience tells us” the total cost could end up between USD 4m and 5m so “it may be prudent to call it a total loss”.

The Correspondence

[48]There followed an exchange of correspondence seeking to address the enormous discrepancy between the Boeing figures and Mr Duke’s figures. A summary of these exchanges is that: i) Lloyd’s Aviation were entirely open with Grecoair about Mr Duke’s estimate. ii) Ethiopian Airlines would not carry out any work, including the work necessary for a “definitive repair estimate”, without an agreement signed by AAC (which they never got). iii) Grecoair sent Mr Duke copies of the first two Boeing reports on 2 November 1995; the third report seems to have been sent by ENSA to Lloyds’ Aviation in January 1996. iv) Mr Duke wrote to Mr Adcock on 8 November 1995 expressing the opinion that the aft damage appeared to have been the result of more than one impact and the forward damage had “accumulated over a period of time”. v) Lloyd’s Aviation requested Boeing and Grecoair to provide a copy of the information against which Boeing had been requested to quote. They also continued to ask that AAC place an order with Ethiopian Airlines to do the work necessary to produce a detailed repair estimate. vi) Grecoair, on 18 November, wrote to Mr Duke saying the alignment of the fuselage may well have been damaged. They offered to arrange for Mr Duke “to see inside the damaged areas and thus see just how serious the damage is” adding “we believe the aircraft is scrap”. vii) Some, to Lloyd’s Aviation largely unsatisfactory, information was received as to how the two accidents were said to have occurred. viii) Lloyd’s Aviation planned a visit to Addis Ababa in March (later changed to 1 May) 1996 and sought answers to specific questions about the accidents. They also required “full access” to the aircraft. Mr Tokoph agreed to provide both. ix) The further information (provided in April by AAC) included in respect of the first accident the statements that “the damage was thought to be very minor … and no immediate repairs were necessary” and “we did not report the accident to our insurers because we thought any damage would be below our deductible excess. It was only when the aircraft was sent to Ethiopian Airlines for a “C” check that we found out how bad the damage was and we then informed our insurers without further delay.” x) In respect of the second accident it was said that only “brief details” could be given. The damage had been discovered prior to take-off and the aircraft was flown back empty and not pressurised to Luanda where temporary repairs had been carried out. xi) On 1 May 1996 there was a meeting in Addis Ababa attended by Mr Duke and Mr McKay of Lloyd’s Aviation, Mr Tokoph and representatives of ENSA and AAC. The aircraft was surveyed visually and photographs were taken. It had not been the subject of any preventative maintenance to protect it against further deterioration. xii) At the meeting and thereafter Lloyd’s Aviation continued to press Mr Tokoph to inform them of whom and when he proposed to instruct to prepare repair estimates so they could be present. Mr Tokoph said he did not want Ethiopian Airlines to provide an estimate. xiii) In fact, and without notice, Mr Tokoph requested Lufthansa to inspect the aircraft in early May. Lufthansa declined to quote. xiv) Despite the repeated requests and Mr Tokoph’s assurances, also without any notice Mr Tokoph arranged for GAMCO to inspect the aircraft on 6 and 7 June 1996. Subject to several caveats, GAMCO estimated the cost of repair in a letter to Mr Tokoph dated 25 June at USD 1.730m.

The GAMCO estimate

[49]On 27 June 1996 Mr Tokoph wrote to Mr Duke saying that he was now pleased to submit a second repair estimate adding that “it was clear to us that the price could even exceed the Boeing quotation of 3.3 million” and that “corrosion is in no way a factor to this estimate”. Mr Tokoph suggested urgent discussions “with a view to declare the aircraft a constructive total loss”.[50]The GAMCO estimate itself set out a description of damage to the forward (8 items) and aft (17 items) areas to which the estimate related. The latter included (item 17) the need for an alignment check of the aft fuselage. The source of the items of damage is unclear. Under “Other Considerations” it was recorded that:
“1. In view of the extent of damage and the repair required to the aircraft, major disassembly and replacement of the fuselage structure will be required. Accordingly the aircraft has to be hangared, shored and jigged to proper alignment position. Thus the aircraft has to be ferried to GAMCO. Our estimate does not cover expenses associated with the ferry flight nor the cost of preparation of the aircraft for ferry flight. 2. As detailed in paragraph (A)3.17 above there is a pronounced wrinkle at the RH lap joint BS 1430 stringer 10 area. Complete disassembly & removal of skin will be required to determine the actual extent of damage to this area. Our estimate does not cover this area and any findings associated with this damage. 3. There are corrosion indications in several areas. These are not costed out as the scope of work does not include such work.”
[51]Mr McKay and Mr Duke were, I think understandably, concerned that they had not been informed about GAMCO’s inspection and that they did not know what instructions had been given to GAMCO. At their request a “breakdown” was provided between the two accidents (one-third to the first accident and two-thirds to the aft damage in the second accident) but despite initial agreement that Lloyd’s Aviation could discuss the estimate directly with GAMCO Mr Tokoph withdrew permission before any real discussion could take place.

The 1 August 1996 meeting of Reinsurers

[52]On 1 August, Mr Gimson, Mr Phillips and Ms Cetta had a meeting with Mr Adcock and Mr McKay and others, including representatives of Beaumont and Son. They concluded that they should obtain an independent estimate to use in negotiations with Grecoair and that they should do so without reference to or the knowledge of Grecoair. The need to obtain the agreement of AAC was recognised. The need to avoid reference to Grecoair was because it was believed Grecoair would prevent any further evaluation being carried out. Mr Shepherd criticised the “covert” nature of this approach. In context it was, I think, unsurprising. It was this decision which led to Lloyd’s Aviation instructing FLS (by a Mr Leach) to provide a repair estimate for the aircraft.

Grecoair and AAC

[53]One of the dilemmas facing Grecoair was that AAC was obliged under the terms of the Lease to maintain the aircraft. When, in August 1996, AAC learnt of the possibility that the aircraft might be a constructive total loss they wrote to Mr Tokoph saying that at the request of Grecoair “the maintenance services which was being performed by Ethiopian Airlines” were to be “temporarily suspended”. Mr Tokoph responded on 8 August saying AAC was “confused” and “we have been asking AAC for many months to do the necessary maintenance to the aircraft which has been neglected for a long time”. Grecoair sought an immediate commitment to a “C” check and “rectifications in order to return the aircraft to an airworthy condition”. AAC was substantially in arrears with the rent at this time.

The FLS Estimate

[54]FLS were instructed by Beaumont and Son on behalf of ENSA and Cigna on 10 September 1996. The letter of instruction expressly raised the alignment issue and whether, if there was any asymmetry, it could be said to be associated with either of the two accidents.[55]Mr Leach inspected the aircraft at Addis Ababa between 16 and 21 September 1996. Mr McKay attended the inspection. Mr McKay recorded that Ethiopian Airlines had advised AAC that much more than a “C” check was required to put the aircraft back into an airworthy condition; that it was not safe to move the aircraft to carry out a symmetry check; and that the temporary repairs had caused some of the defects seen.[56]Mr Leach prepared a preliminary report which he sent to Mr Duke on 29 September. He, like Boeing, considered the aircraft required a “D” check to make it airworthy. He said the cost of the check would exceed the value of the aircraft. The forward damage, Mr Leach thought, could have been caused by one incident or the cumulative effects of several incidents. There was evidence of distortion in the rear fuselage adjacent to the temporary repairs which Mr Leach thought was caused by continued operation of the aircraft in an unsound condition after the second accident but which would be removed during the repair process. He also reported that a skin crack at floor level near the rear pressure bulkhead on the left hand side was corrosion induced and not related to the second accident. Following a meeting on 9 October, Mr Leach slightly increased the provisional estimated costs of repairing the forward damage to USD 177,175 and of repairing the rear damage to USD 631,025, provided the repairs were carried out by FLS at Addis Ababa. He did not suggest the work could not be done as estimated.[57]Receipt of the FLS report led to the deductible reinsurers agreeing that Lloyd’s Aviation should seek a meeting to attempt to negotiate a settlement of Grecoair’s claims on a cash in lieu of repair basis by reference to the FLS estimate. Cigna agreed to contribute their policy limit towards the second accident (USD 400,000), unless it was decided that the aircraft was a constructive total loss, and Tilling agreed to contribute USD 77,000 after allowing for the USD 100,000 deductible towards the first accident. Ms Cetta was not to be represented at the meeting but agreed to consider making a contribution to a settlement should the meeting lead to a recommendation to that effect.

Lloyd’s Aviation and Boeing

[58]Mr McKay wrote to Boeing on 18 October about Boeing’s quotation. He asked if it was “correct to assume” the quotation included restoring the structural integrity of the repair area including the surrounding structure and issues of corrosion. Boeing responded on 28 October that the estimate only included “damages described at the time” the estimate was supplied and did not include the matters to which Mr McKay had referred. Mr McKay said this response did not help him to understand what damage had been “described at the time”.

Meetings in Addis Ababa between 7 and 9 November 1996

[59]It is not entirely easy to deduce from the statements and documents the sequence of events, but there seem to have been meetings in Addis Ababa between 7 and 9 November both before and after a further inspection of the aircraft by FLS. Representatives of AAC, ENSA and Beaumont and Son, Mr McKay and Mr Duke of Lloyd’s Aviation, Mr Leach of FLS and Mr Tokoph were present. Mr Duke had sent a long fax to Mr Tokoph dated 22 October in which he had recited the history of the matter and put forward the figures estimated by FLS stating, as was obvious, that the Lloyd’s Aviation view of the damage was “clearly very different” from the “interpretation” of Mr Tokoph. The FLS report and estimate were not enclosed. Indeed it seems probable that Grecoair did not have copies of them until they were disclosed by the defendants in these proceedings.[60]At the meeting Mr Tokoph made it clear that he wanted cash in lieu of repair and did not want the aircraft back. He was very critical of the FLS estimate and the work it was said to omit. He supported the Boeing and GAMCO estimates as showing the aircraft was a constructive total loss. Lloyd’s Aviation supported the FLS figures with a worst case contingency addition of 15% for the second accident.[61]Mr Tokoph and Mr McKay had a discussion outside the meeting. A settlement figure of USD 1.7m or net USD 1.5m was discussed between them. Mr Tokoph’s evidence, in his first witness statement, was that Mr McKay made an offer to settle the claims in that amount which he accepted. Mr McKay’s evidence was that he made clear he was not making a formal offer and that the discussion was in any event expressly subject to the approval of underwriters. I am quite sure Mr McKay is right about this. He is supported by his own notes of the meeting, his notes of a telephone conversation with Mr Tokoph on 11 November and by Mr Duke’s report to Jardines dated 19 November. Mr Shepherd declined the opportunity to cross-examine Mr McKay. Mr Tokoph’s statement was also belied by his own letter dated 10 December. In cross-examination Mr Tokoph said that a compromise was reached “but it wasn’t formalised or finalised”. His evidence about this meeting did him little credit.

Lloyd’s Aviation Report of 19 November

[62]In his report to Jardines, Mr Duke expressed the opinion that final repair costs could exceed the FLS estimate which he thought had “a reliability factor of about 75%”. The report also shows that Lloyd’s Aviation were, with the benefit of Beaumont’s advice, alive to the fact that claims by Grecoair against ENSA were subject to arbitration in Angola.[63]The report was seen and scratched by ENSA and some reinsurers after Ms Cetta had endorsed it:
“Underwriters would be prepared to offer US$ 250,000 in full and final settlement of this claim subject to a release and discharge ….”

The 9 December “Offer”

[64]Mr Adcock informed Lloyd’s Aviation on 9 December of the views of reinsurers. He noted that Ms Cetta’s scratch was also subject to the agreement of non-London reinsurers on the Hull All Risks policy “which we shall seek to obtain once you confirm that the offer has been accepted”. The proposal was a settlement for USD 727,000 made up of USD 400,000 from Cigna, 77,000 from Tilling and 250,000 from Hull All Risks underwriters. Mr Adcock’s letter was copied to Mr Tokoph. On 10 December he rejected the “Jardines offer” and offered to settle for USD 4.5m on the basis the aircraft was a constructive total loss.

December 1996 to February 1997

[65]Nothing much happened after Mr Tokoph’s letter. Towards the end of February Mr Bolshaw sought to progress the claims. Mr Tokoph wanted to meet the leading underwriter on the hull all risks reinsurance. He contacted Ms Cetta who agreed to meet him. On 4 March Mr Adcock, Ms Cetta, Mr Noble and Mr Da Silva met to discuss the claims and it was agreed that Ms Cetta would explain her position at the proposed meeting.[66]The meeting was fixed on 7 March to be held in the morning of Tuesday 11 March at the offices of the Butler Syndicate. The attendees were, in the event, Ms Cetta, Mr Noble, Mr Adcock, Mr Tokoph and Mr Bolshaw.

The Context of the 11 March Meeting

[67]There are some to my mind significant features of the background to the meeting, which I have set out in the preceding paragraphs, against which what was said and discussed at the meeting should be considered. In summary: i) Reinsurers were generally unimpressed by the nature of the claims and the information provided about them. Ms Cetta said that from an early stage she had “decided that Grecoair was to be regarded with suspicion”. I am sure she did and that it was a rational suspicion. ii) The aircraft was considered by everyone to be beyond repair, at least in the sense that the cost of repair would far exceed its value. Mr Tokoph did not want it repaired: his starting point was that it was a constructive total loss. Reinsurers knew Mr Tokoph did not want the aircraft repaired. They also believed that the non-accident damage was so extensive that there was no point in repairing such accident damage as there might be. That belief was founded on what both Boeing (on 19 October) and FLS had reported. iii) Both Mr Tokoph and reinsurers were looking for a cash settlement, but they were a long way apart on the figures. iv) Cigna was known by all attendees to be willing to pay to the limit (USD 400,000) of the deductible reinsurance for the second accident. v) The real issue on which Grecoair and reinsurers were in conflict was to what extent was the undoubtedly unairworthy condition of the aircraft the result of the two claimed accidents or the result of non-accident damage including wear and tear and normal maintenance requirements and, in particular, corrosion. That issue was no nearer resolution in March 1997 than it had been from the outset. It was reflected in the Boeing, GAMCO and FLS estimates. vi) Mr Tokoph and Mr Bolshaw were aware that absent express authority to do so, and there was no “leading underwriter” clause, Ms Cetta could not speak for or commit all the underwriters on the Hull All Risks reinsurance nor could she speak for or commit the deductible reinsurers who were not to be present at the meeting. Ms Cetta herself was of course aware of the limits of her own authority. THE 11 MARCH MEETING The Documents Mr Adcock’s File Note

THE 11 MARCH MEETING

[68]Mr Adcock made a file note of the meeting on the day it was held. The note is attached to this judgment as an appendix. It is unquestionably the best record of what took place. It shows that the meeting only lasted some 25 minutes and that the parties were as far apart as ever on what the cost of repairing the accident damage would be or would have been.[69]The last paragraph of the note indicates confrontation not agreement. Grecoair relies on the first sentence of that paragraph where it records that Ms Cetta said “she was happy to have the aircraft repaired” and there is no dispute that Ms Cetta did use those words and, I think, more than once at the meeting. I also think, and again it is not really in dispute, that she referred to the repair being done by FLS. There is an issue as to whether or not, as Ms Cetta says, they were qualified by words to the effect that she was happy to have the aircraft repaired provided Grecoair carried out the non-accident repairs first. Mr Adcock’s note makes no reference to such a qualification.

Ms Cetta’s File Note

[70]This note, too, as I find, was made shortly after the meeting. The note is consistent with Mr Adcock’s note but less full. It makes no reference to repairing the aircraft at all, qualified or otherwise, save for the last paragraph which reads:
“The meeting ended. 5 minutes later Mr Bolshaw called to say that they would like the aircraft repaired.”

Jean Gleeson’s File Note

[71]There is a note made by Jean Gleeson of Lloyd’s Aviation of a telephone conversation she had with Mr Tokoph on 11 March. Mr Tokoph was seeking to contact Mr McKay. The last paragraph of this note reads:
“Mr Tokoph said that he was not accepting Maria Cetta’s offer and had decided to opt for repairs to the aircraft.”
[72]The “offer” referred to was the offer to contribute USD 250,000 subject to agreement of the non-London market.

Mr Bolshaw’s Draft Fax and the Grecoair 13 March letter

[73]The next day (12 March) at Mr Tokoph’s request Mr Bolshaw drafted a fax to be addressed to ENSA and Jardines and copied to Ms Cetta amongst others. The fax referred to the meeting and included the following:
“It became apparent during the meeting that it was impossible to agree on the quantum of the claims as our belief is totally different to that of Re-insurers in that we do not believe the aircraft can be repaired for the sum they have offered. Maria Cetta said they were perfectly happy to repair the aircraft using FLS who Lloyd’s Aviation had obtained repair estimates from. We have therefore decided that this is the only option available for an amicable settlement to be reached. Please therefore proceed to having the aircraft repaired as soon as possible and keep us advised as to when this work will proceed. We expect the aircraft to be repaired in accordance with the manufacturers recommendations and to be FAA approved. The condition of the aircraft once repaired needs to be at least as good as it was prior to the damage occurring. We do appreciate however that we are only dealing with the accidental damage and not other items.”
[74]Grecoair sent the draft unchanged to ENSA and Mr Adcock on 13 March and Mr Adcock forwarded it to Ms Cetta the next day. The wording looks to a future settlement. It is not expressed as one would expect it to be if it was intended to accept an offer “to repair” so as to create a binding contract.

The reply to the Grecoair letter

[75]On 18 March, Ms Cetta, Mr Gimson , someone from Tilling and Mr Adcock met at the offices of the Butler Syndicate. I am quite satisfied on the evidence that the purpose of the meeting was to discuss and seek to agree a reply to Grecoair’s letter. Mr Gimson made a note of the meeting. The note includes “Maria assuming Grecoair proceed with repair – the problems relating to which have been spelt out to them ….”[76]The note demonstrates what Ms Cetta said was the invariable rule and her understanding that underwriters did not instruct repair companies to do repairs but authorised their instruction by the assured. Whilst I accept that was her understanding, several of the documents suggest the understanding was not shared by others. The “problems” spelt out were, she said, spelt out by her at the 11 March meeting, namely that the aircraft was in such a condition that it would never fly again.[77]The reply was sent by Mr Adcock and expressly approved by underwriters. It was dated 25 March and stated, in part, that:
“… The deductible underwriters were advised by their agents that, even if the two areas of damage were repaired, the aircraft was unlikely to fly again due to the extensive amount of corrosion to the fuselage …. … underwriters would like to conduct a detailed review of the alternative repair estimates before making a decision as to where and how the aircraft is to be repaired. There is a very real prospect that the aircraft may not be moved due to the extent of the non-accident related damage either before or after it has been repaired. As you have expressly pointed out, underwriters will only be responsible for accident related damage. Please advise what proposals you have to effect all non-accident related damage repairs as underwriters would wish to test the aircraft as soon as these non-accident related areas have been repaired Any settlement will be conditional upon a release and discharge being signed by all relevant parties and you are unlikely to sign the same until a full flight test has been carried out. Unless you are able to confirm the precise dates on which you propose to effect repairs, underwriters may consider deferring authorising repairs until you are in a position to provide them with a date as they are concerned that the aircraft may be beyond economic repair due to the extensive non-accident related damage.”
[78]This was the first documented reference to the “non-accident” repairs being carried out first. The reference is not expressed in terms of something which was said at the 11 March meeting.

The reply to Mr Adcock

[79]Mr Bolshaw drafted a reply to the letter of 25 March. It shows that Grecoair maintained that the repair work for which GAMCO had estimated was the work required to be done because of the accidents. The draft also states that if that work were to be done it would reveal that the damage was so serious that the aircraft was a total loss and so for Grecoair to carry out any further work would be a “total waste of money”.[80]Mr Tokoph amended this draft before writing in reply on 31 March. In his letter he states that once insurers have carried out the accident repairs Grecoair will (and so would be able to) fly the aircraft to Texas to carry out a “C” check as part of normal scheduled maintenance. Ms Cetta annotated a copy of this letter:
“may we please have an answer to the question raised in our letter of 25th March. When are you proposing to repair the non-accident related damage?”
[81]These letters vividly demonstrate that the real dispute between the parties was about what was and what was not accident damage and the cause of the condition of the aircraft and so as to which party was responsible for what repair. That dispute remained just as intractable and unresolved after as before the meeting on 11 March.

The Oral Evidence

[82]I see little advantage in an analysis of the oral evidence about the meeting. It is clear that Ms Cetta was the dominant personality at the meeting. The meeting was short and rather sharp. Ms Cetta undoubtedly said that the aircraft was a total loss irrespective of the two accidents and that it was not worth repairing. I accept that she believed from what she had been told that the corrosion was such that the accident repairs to the fuselage could not be carried out unless the corrosion was repaired. Mr Bolshaw agreed that Ms Cetta made it clear that she did not believe that Mr Tokoph would repair the aircraft, which Mr Tokoph denied.[83]No one now suggests that any agreement was arrived at in the meeting itself. It is Grecoair’s case, supported by the evidence of Mr Tokoph and Mr Bolshaw, that Ms Cetta was making a formal offer “to repair the aircraft” using FLS, an offer which they accepted in the telephone conversation held shortly after the meeting between Ms Cetta and Mr Bolshaw and confirmed in the letter sent on 13 March. It is the defendants’ case, supported by the evidence of Ms Cetta, Mr Adcock and Mr Noble, that no offer at all was made at the meeting and in any event the reference to repairing the aircraft plainly meant repairing only the accident damage and was made expressly on the basis that Grecoair would have to repair the non-accident damage first (Ms Cetta) or that the non-accident damage was in fact also repaired by Grecoair (Mr Noble and Mr Adcock).[84]In my judgment all the witnesses to the meeting were doing their honest best to recall what was said. But their recollections have inevitably been affected by the passage of time and the fact that the need to seek to recall the meeting only arose some years after it had taken place. The claim was issued in September 2000. It was stayed from July 2001 until 16 January 2004 because Grecoair failed to provide security for the defendants’ costs as ordered.[85]Although I accept Ms Cetta’s evidence that she played no part in drafting and did not read the pleadings at any relevant time, I think the pleadings also provide some indication as to changing recollections. The original claim (and thus the second issue) appeared to attribute the agreement on which Grecoair relies to the meeting itself. By very late amendment (in October 2004) the present case was expressly put forward for the first time that an offer to repair was made at the meeting and accepted in the telephone conversation with Mr Bolshaw on the same day and confirmed in the 13 March letter. The original defences did deny that any agreement was made, but it was only in the Amended Defences first served in January 2004 that it was alleged that if an agreement to repair the aircraft was made it was “conditional on the claimant first repairing all damage to the aircraft which was not caused by the insured perils …”

Conclusion

[86]I am sure that the contemporary documents and the context in which the meeting took place are the best guide to the reality. I do not think that Ms Cetta spelt out that Grecoair must first repair the non-accident damage before insurers repaired the accident damage. The contemporary documents do not support her. Had she done so, moreover, I doubt Mr Tokoph and Mr Bolshaw would have advanced the case for repairing the aircraft at all. I also suspect Ms Cetta and Mr Tokoph were at cross-purposes as to who would instruct FLS to do the repairs which could of course dictate what FLS was to do. But I do think and find that the references to repair were brief and general and made in a context in which it was clear and everyone understood that if repairs were to be done or paid for (which no one thought sensible) then they would be done by FLS (not Boeing or Gamco) and each of Grecoair and insurers would be responsible for some of the repairs or to make payments for them. The split was easy to define in principle: non-accident or accident damage. But it had proved impossible to state or agree what works fell within the definitions let alone to cost them. The parties started out in radical disagreement on the matter and remained so. In my judgment it is that factor which above all has the consequence that no binding agreement even begins to emerge from the meeting and the documents to which I have referred. The participants were fencing. The fight was about money. Each meant something different when they talked of “repair”. On any objective assessment the only offer made which was even arguably capable of acceptance so as to become a legally binding commitment was, as Ms Cetta said and I think Mr Tokoph appreciated, a money offer. That was rejected. Repairing the aircraft was each party’s way of saying that if repairs were to be done you will see I am right about the extent of the damage for which each of us is responsible and must pay. As Mr Noble put it in cross-examination “the discussion was being undertaken along the lines of we can’t do our damage unless you do yours”.[87]In summary: i) Plainly it is an unpromising basis for a formal agreement involving a substantial commitment that it is said to arise from an offer made at a short meeting which ended with talk of litigation and an acceptance made in a short telephone conversation five minutes after the meeting ended. ii) The words attributed to Ms Cetta that she was happy to have the aircraft repaired (by FLS) are words which I am sure she said and said more than once at the meeting. But they meant one thing to her and another to Grecoair. She meant, and was understood to mean, repair only the accident damage. She meant by the accident damage and was understood to mean the repairs which FLS had costed and which would achieve nothing as the aircraft would remain unairworthy without also repairing the non-accident damage. Grecoair, in contrast, was maintaining the stance that the accident repairs alone would restore the aircraft to an airworthy condition in which ordinary maintenance would be all that was then required for the aircraft to return to service. In those circumstances a statement by Ms Cetta that she was happy to repair the accident damage simply served to demonstrate the gulf that already existed between the parties as to what that was. iii) I do not think the language attributed to Ms Cetta is the language of a formal offer open to acceptance. The contrast is well illustrated by Jean Gleeson’s note. There was an offer in the legal sense of cash in lieu. Any offer, in that sense, “to repair”, if it came from any party, came from Grecoair. Indeed, the terms of the 13 March letter I think bear that out. But the letter simply served to lead to the further exchanges which demonstrated the want of any agreement. iv) The one “technical” point of substance is that Ms Cetta knew she could not make a formal offer binding on the following market or deductible reinsurers and Grecoair could not or not reasonably at least have thought that Ms Cetta was authorised to make a formal offer on behalf of the deductible underwriters. Indeed the very fact that, as Mr Adcock’s file note demonstrates, Mr Tokoph enquired whether he could accept Cigna’s offer and meet Tilling demonstrates as much. Mr Bolshaw said the question was raised only because Ms Cetta was being unreasonable and not because he or Mr Tokoph thought she was not authorised to act for them. I did not find that convincing. I think that objectively it is as improbable that any formal offer open to acceptance and binding on all underwriters without more was made by Ms Cetta as that such an offer was perceived to have been made by Mr Tokoph.[88]Mr Shepherd also submitted that the terms of the basic cover (paragraph 15) gave underwriters a right to elect between the options of making payment for, replacing or repairing accidental loss or damage and that once an election was made it could not unilaterally be changed. But I think that submission misses the point. There was no election for repair in any conclusive sense because the parties were not agreed as to what was to be repaired. If Grecoair cannot establish an offer and acceptance such as to give rise to a binding commitment “the doctrine of election” cannot be deployed to provide a different outcome.

Subsequent Events

[89]AAC had been sent a copy of Mr Adcock’s note of the 11 March meeting and sought to rely both upon a supposed repair agreement and the fact that Grecoair had excluded them from negotiations with Lloyd’s Aviation to decline all further responsibility for the aircraft. Grecoair’s response, signed by Mr Tokoph and addressed to ENSA, dated 14 April was:
“… we confirm that no agreement has been reached between Grecoair and Lloyd’s Aviation on the 11 March ’97, in fact no agreement has yet been made to this date regarding the insurance of this aircraft. We remind you of our valid claims for damages suffered to our aircraft while operated by AAC and reaffirm our rights under the policy to claim from you up to a maximum limit of USD 4,500,000 …. As this settlement is long overdue, we urge you and your Lloyds partners to immediately repair the aircraft.”
[90]Mr Tokoph sought to explain this letter by saying it meant that whilst there was an agreement it had been broken or insurers were seeking to undo it. That is not what the letter says and I think it says what it was meant to say.[91]Mr Tokoph also pursued AAC with demands that AAC carry out a “C” check and rectify all defects on the aircraft.[92]Mr Tokoph, assisted by Mr Bolshaw, complained to Lloyd’s about what was termed the lack of response from reinsurers to Grecoair’s claims. The terms of the complaint, drafted by Mr Bolshaw on 25 April 1997, and sent the next day by Grecoair to the Complaints Department of Lloyd’s, are not only dismissive of the 11 March meeting but far from recording any agreement or even offer by reinsurers to repair the aircraft suggest the opposite. Neither Mr Tokoph nor Mr Bolshaw offered any rational explanation consistent with Grecoair’s case for the terms of these documents.[93]Ms Cetta’s response to the complaint made a brief reference to the 11 March meeting “at which underwriters indicated their preparedness to repair the aircraft”, stated that she was advised that even if the accident damage was repaired it was unlikely the value of the aircraft would exceed the cost of repairs and recorded that it was proposed to reinstate the offer of a payment of USD 750,000.[94]By a fax sent on 3 June Mr Adcock informed Mr Tokoph that FLS would not be able to commence repairs prior to May 1998 and “on the assumption” that would not be acceptable to Grecoair put forward an offer of £775,000. That was rejected. There followed correspondence between Angolan lawyers for Grecoair and, on 24 March 1998, Beaumont and Son on behalf of the all risks insurers. The cash offer was again repeated. Beaumont’s also wrote:
“If settlement on this basis is not acceptable to Grecoair, then arrangements will be made for FLS … to undertake the repairs to the aircraft.”
[95]Mr Shepherd placed a great deal of reliance on this letter. He pointed out that even at this date it made no reference to the supposed condition that the non-accident damage must be repaired first, and that it appeared to say that it would be insurers who would make the arrangements with FLS rather than approve arrangements to be made by Grecoair with FLS. I have said that I am not satisfied that there was any “condition” in those words but there was also no “offer” made on 11 March to which such a condition might have been applied. Ms Cetta said, and I accept, that she played no part in drafting this letter nor did she see it before it was sent. In any event the letter did not address the issue of who was responsible for what “repairs”.[96]In summary none of the subsequent correspondence is, in my judgment, in any way inconsistent with the conclusion I have reached that no agreement was made for the repair of the aircraft. Indeed that correspondence is not just consistent with that conclusion but lends support to it.[97]So far as is known, the aircraft remains at Addis Ababa unrepaired and unloved.

CONCLUSION ON THE SECOND ISSUE

[98]I am quite satisfied that Grecoair has failed to establish the agreement on which it seeks to rely or any agreement of a like nature. The answer to the second issue (as phrased or as amended to reflect the case advanced in the Amended Claim) is that no such agreement was made.

THE FIRST ISSUE

[99]As I have said (paragraph 6) the emphasis of Grecoair’s submissions was upon the Second Issue. That was not surprising. Essentially the submission that reinsurers undertook a direct liability to Grecoair depends on the wording in the “Information” clause of the All Risks Reinsurance to which I have referred in paragraphs 22 and 23 of this judgment and in the deductible reinsurance policies to which I have referred in paragraph 25. Although Mr Shepherd also sought to rely upon Condition 9 of the All Risks Reinsurance (see paragraph 21) I do not think it has any relevance to the issues. It merely records that a number of specific conditions are to apply as they applied in the previous cover.[100]In my judgment, Grecoair’s case is unsustainable: the Information, as I have said, was and was expressed to be information about the contents of the ENSA original insurance. It contrasts with the Conditions which are terms of the reinsurance. It contrasts also with the “Cut-Through Clause”. It is trite that a reinsurance is a contract between the original insurer and each reinsurer. The evidence of Mr Noble, Mr da Silva and Mr de Jesus is that such was the case between the Butler Syndicate and ENSA. The documents support them without qualification. There is no allegation, nor could it be sustained if there were, that ENSA acted as an agent for Grecoair in agreeing the reinsurances or that reinsurers are in some way estopped from rejecting a direct exposure to Grecoair. The Certificates of Reinsurance (paragraphs 27 to 29) record that ENSA is the reinsured and, albeit with much greater clarity in 1995 than 1993, that references to the aircraft lease were in the “Policies of Insurance” (my emphasis).[101]The effect, of course, is that reinsurers have consented to the stated terms being included in the ENSA policies and cannot refuse cover to ENSA in the event that ENSA pays claims to Grecoair on the basis of those terms.[102]Both Mr Tokoph and Mr Bolshaw said it was their intention to obtain for Grecoair direct rights against reinsurers because of their concerns about proceedings against ENSA in Angola and the quality of ENSA as security. Mr Shepherd also pointed to the small percentage retentions of ENSA (paragraph 21) and described the role of ENSA as “a front” or “fronting”.[103]Mr Tokoph was well aware that the insurance of AAC had to be placed locally with ENSA and that the majority of the risk would be reinsured in London. He said as much in a letter to the Chairman of Lloyd’s dated 29 May 1997. He also knew, because he was told when it appeared the dispute could not be resolved, that reinsurers considered his legal remedy to be by way of proceedings against ENSA in Angola. At the time, there is no record that either he or Mr Bolshaw questioned that. The 13 March 1997 letter was addressed to ENSA. Nor do I think the reference to fronting is relevant. ENSA did retain some risk, albeit a small percentage, but a small percentage of a potentially substantial exposure.[104]The conduct of the claims also accorded with the contractual structure. Reinsurers acted in accordance with AVN 41 in handling the claims. But ENSA were kept informed by Lloyd’s Aviation and Jardines throughout the events. Jardines (Mr Adcock) were ENSA’s brokers. They had no authority to act for Grecoair nor did they purport to do so.[105]In my judgment, there is nothing in either the contractual documents or context which justifies the case Grecoair seeks to make on the first issue. To the contrary, the documents and context are all consistent with the conventional status of assured, insurer and reinsurer. Grecoair’s claim on this basis therefore also fails.

OVERALL CONCLUSION

[106]Reinsurers succeed on both issues. The consequence is that Grecoair’s claim is unsustainable. I will hear the parties on the form of order and any ancillary matters, if they cannot be agreed, when this judgment is formally handed down.