FW Aviation (Holdings) 1 Limited v VietJet Aviation Joint Stock Company [2026] EWHC 1996 (Comm)

[2026] EWHC 1996 (Comm)Case No CL-2022-000467
IN THE HIGH COURT OF JUSTICE
KING'S BENCH DIVISION
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT
Venue Royal Courts of Justice, Rolls Building, Fetter Lane, London, EC4A 1NLDate 31 July 2026
Before
MR JUSTICE BIRT
Between
FW AVIATION (HOLDINGS) 1 LIMITEDClaimantVIETJET AVIATION JOINT STOCK COMPANYDefendant
Akhil Shah KC, Niamh Cleary and Laurentia de Bruyn (instructed by Quinn Emanuel Urquhart & Sullivan UK LLP) for ClaimantSteven Thompson KC, Erin Hitchens, James Kane and James McWilliams (instructed by King & Spalding International LLP) for DefendantHearing Hearing dates: 9-10, 12, 16-19, 23-24, 30-31 March 2026Additional written submissions 1 and 7 April 2026
Approved JudgmentThis judgment was handed down remotely at 10.30am on 31 July 2026 by circulation to the parties or their representatives by e-mail and by release to the National Archives..............................MR JUSTICE BIRT
[1]This judgment follows the third trial in this litigation in which the Claimant (“FWA”) seeks to recover substantial sums in respect of the termination of the leasing of four aircraft by the Defendant (“VietJet”). Issues between the parties going to liability, and a number of issues relating to quantum, were determined after the two earlier trials by Picken J in: i) The liability judgment: [2024] EWHC 1945 (Comm) (“Judgment 1”). This judgment was the subject of an unsuccessful appeal: [2025] EWCA Civ 783 (“the Court of Appeal Judgment”). ii) The first quantum judgment: [2025] EWHC 928 (Comm) (“Judgment 2”).[2]A full background to the matters in dispute was set out in Judgments 1 and 2, and I do not repeat that here. Rather, I set out below a summary of the background, as well as addressing matters pertinent to the issues that arise for determination in this third judgment, including factual matters that have arisen since Judgment 2. This should be read in conjunction with Judgment 1 and Judgment 2. 3. Contents Introduction and background 4 The Parties 4 The Aircraft 4 The JOLCO schemes 4 FWA’s involvement 7 The initial stages of the dispute, redelivery and export of the Aircraft 8 Subsequent sale and lease of the Aircraft 10 Key contractual provisions 11 Excluded Property 11 Clause 10.2 13 Clause 20 13 Clause 23 17 Judgment 1 and Judgment 2 21 Losses now claimed 22 The Trial 23 Factual evidence 23 Expert evidence 24 The FCAS 25 The overarching issues 26 The contractual scheme, construction of the indemnity provisions and related matters 26 Clause 23.1 – is it limited to third party claims? 37 Clause 23.1 – what causal link is required? 42 Whether FWA can recover an indemnity for costs incurred by other FitzWalter Capital entities 44 Remoteness of loss 46 The delays in exporting the Aircraft 47 The parties’ submissions on particular points of delay, and their effect 55 The effect of VietJet’s alleged interference 64 The claims on the indemnities in light of the above 68 Claims to put the NEOs in the Return Condition 69 Construction of the clause 20.4 indemnity 69 The claim for costs under the clause 20.4 indemnity 76 Costs incurred 76 Costs not incurred 79(i) LLPs 79(ii) Engine Performance Restoration Shop Visit 82(iii) On condition and condition monitored parts 83(iv) Galleys/lavatories/seats 84(v) Other parts not new 85(vi) Wheels, tyres, brakes 86(vii) Fuel on board on redelivery 86 The diminution in value claim 87 Stub Life 88 Engine shop visit cost 89 Cost of a 6 year check 90 Block D upgrades 91 Conclusion on diminution in value 92 Other claims listed in the FCAS 92 FCAS claim 1: Project management, technical support and remarketing 92 FCAS claim 2: Aircraft parking, storage and preservation 96 FCAS claim 5: Loss of Aircraft maintenance and component utility 100 FCAS claim 6: Aircraft re-registration and regulatory compliance 103 FCAS claim 7: Return of the Aircraft to flight ready condition and ongoing maintenance (and associated parts of FCAS claim 9) 104 Claim 7(a) 105 Claim 7(b) 106 Claim 9(e) 109 Claim 9(f) 110 FCAS claim 8: Non-revenue flights and Aircraft insurance 110 Lost Rental Claims 112 Whether the lost rental claims are recoverable 112 Lost Rental Claims - quantum 114 Loss Rent claims – conclusion 118 Alternative claims in Conversion / Mesne Profits 118 Costs of Enforcement 127 VietJet’s Counterclaim 134 Overall conclusions 135 Introduction and background The Parties[3]FWA is an aircraft leasing company registered in Jersey and is ultimately controlled by its parent fund, headquartered in the UK, FitzWalter Capital, which since 2021 has operated funds investing in distressed credit assets. VietJet is a Vietnamese low-cost commercial airline. The Aircraft[4]The four aircraft the subject of this litigation (“the Aircraft”) were delivered to VietJet in 2018 and 2019: i) two Airbus A321-271 passenger jet New Engine Option (“NEO”) aircraft, with serial numbers MSN 8906 and MSN 8937; and ii) two Airbus A321-211 passenger jet Current Engine Option (“CEO”) aircraft, with serial numbers MSN 8577 and MSN 8592. The JOLCO schemes[5]The Aircraft were leased to VietJet using a financing structure known as a Japanese Operating Lease with Call Option (“JOLCO”). The structure of the JOLCO leases for the four Aircraft is set out in further detail at paragraphs 7 to 22 of Judgment 1.[6]JOLCOs are used to purchase high-value assets such as aircraft, where typically 25% of the financing is provided by Japanese equity investors (usually small businesses and individual investors) and 75% is typically provided by banks by way of debt. The aircraft are acquired by a special purpose vehicle (“SPV”) and leased (or as in this case sub-leased) to an airline for a term, usually 12 years. The airline makes regular rental payments (and thus, indirectly, pays the loan interest and principal) and it is anticipated that the airline will purchase the aircraft at the end of the term (though it is not obliged to do so). If the airline does not exercise its option to purchase the aircraft, at the end of the lease period it must return the aircraft in compliance with the conditions set out in the lease (in this case, referred to as the “Return Conditions”, as dealt with further below).[7]The airline is in this way able to use an expensive asset without purchasing it outright at the start of its intended operations. The investors benefit from the JOLCO scheme as it helps them save on their tax liabilities. As the primary benefit of the scheme to the investors is tax savings, early interruption of the lease is highly disruptive for them and there are significant early termination sums that are payable by the airline in such a scenario.[8]In this case, Japanese SPVs, the shareholders in which were the Japanese 25% equity investors, purchased each of the Aircraft. The balance of the price for each Aircraft was provided to each SPV by syndicated lenders under a Loan Facility Agreement. In respect of the CEO Aircraft lending, BNP Paribas (“BNP”) acted as Facility Agent and Security Agent; in respect of the NEO Aircraft lending, Natixis Singapore Branch (“Natixis”) acted as Facility Agent and Security Trustee. (The fact that BNP was referred to as “Security Agent” whereas Natixis is referred to as “Security Trustee” in the contractual documentation is immaterial. For convenience, I will generally use the nomenclature “Security Trustee” to refer to both.) The Japanese SPVs therefore became the owners of the Aircraft.[9]The Japanese SPVs, as “Lessor”, then leased the Aircraft to a series of SPVs owned by VietJet (referred to both as the “Lessee” and the “Sub-Lessor” of each Aircraft), which then in turn leased each of the Aircraft to VietJet (the “Sub-Lessee”). Thus, the key transactional documents were (for each of the Aircraft): i) A Loan Agreement, under which the Lessor (i.e. the Japanese SPV) borrowed money from the Lenders to finance about 75% of the cost of acquisition of the Aircraft. ii) A (Head) Lease, by which the Aircraft was leased by the Lessor to the Lessee, also referred to as the Sub-Lessor – this was an SPV controlled by VietJet. iii) A Sub-Lease, by which the Aircraft was leased by the Sub-Lessor to the Sub-Lessee, which was VietJet.[10]The personal liability of the Lessors to the Lenders was limited, with the Lenders’ recourse primarily being to the security package that supported the loan. As explained by Picken J in Judgment 1 at paragraph 19, the security arrangements supporting each of the Loan Facility Agreements consisted of the following aspects:
“(1) a New York law mortgage, pursuant to which the Borrower (the SPVs) granted the Security Trustee/Agent a first priority Security Interest over the Aircraft (the ‘NY Mortgages’); (2) a Security Assignment (Lessor) between the Lessor/Owner (the SPVs again) and the Security Trustee/Agent pursuant to which the Lessor in each case assigned its interests in, inter alia, the Head Leases, the Sub-Leases and the Security Assignments (Lessee) (to which I refer shortly) to the Security Trustee/Agent by way of security for “any and all liabilities and obligations … which are now or which may be at any time and from time to time hereafter be due, owing, payable or incurred or be expressed to be due, owing, or payable from or by the Lessor to the Financing Parties …under any Operative Document…” (the ‘Lessor Security Assignments’) - in each case VietJet signing an Acknowledgement of Assignment of Sub-Lease (the ‘Assignment Acknowledgements’) agreeing to the terms of the Lessor Security Assignments; (3) a Security Assignment (Lessee) entered into between the Lessor/Owner (the SPVs once again) and Lessee/Sub-Lessor (the VietJet SPVs) pursuant to which the Lessee assigned its interest in the Sub-Lease and ancillary rights to the Lessor as security for “any and all liabilities and obligations … due… from or by any Lessee Party to the Lessor under any Operative Document…” (the ‘Lessee Security Assignments’) - the Assignment Acknowledgements also confirming VietJet’s consent to the Security Assignments (Lessee); and (4) an Irrevocable Deregistration and Export Request Authorisation (‘IDERA’) executed by VietJet in favour of the Security Trustee/Agent and filed with the Civil Aviation Authority of Vietnam (the ‘CAAV’).”
[11]The financing arrangements involved a separate set of documents for each of the Aircraft, identical in structure, and in many respects materially identical in terms, though there were some differences between the terms in relation to the NEO Aircraft compared to those for the CEO Aircraft, which are material to the issues arising in this judgment.[12]Importantly, the assignment that took place under the Security Assignment (Lessor) was a partial assignment, because it omitted what was defined in the Leases as the “Excluded Property”. Picken J identified which categories of rights under the Leases and Sub-Leases were defined as Excluded Property at paragraph 16 of Judgment 2. They include rights under certain provisions which would ground claims against VietJet in the circumstances which have occurred in this case. As Picken J recognised at paragraph 17 of Judgment 2:
“…the Excluded Property provisions operate to preserve the rights and expectation of the Japanese equity investors, and ensure that they are not available to meet lenders’ claims. That is why the Excluded Property was not assigned as part of the security package provided to the lenders, but remained with the Lessors.”
This has relevance in the current dispute because, as explained further below, in respect of the NEO Aircraft, FWA acquired the Excluded Property, but it did not do so in respect of the CEO Aircraft. FWA acknowledges that this means that some claims (which it has in respect of the NEO Aircraft) are not available to it in respect of the CEO Aircraft.[13]For each of the Aircraft, the Loan Agreement was drawn down in full at the outset and provided for repayment of capital and interest over its term of about 12 years by quarterly payments. The lease payments were calibrated to enable the SPVs to meet their loan repayment obligations. VietJet had an option to purchase at expiry.[14]As explained in more detail at paragraphs 23 to 25 of Judgment 1, registrations were made in respect of “international interests” and assignments of “international interests” on the international registry under the Cape Town Convention on International Interests in Mobile Equipment (“the Cape Town Convention”) and its associated Protocol on Matters Specific to Aircraft Equipment (“the Protocol”). The Convention is implemented in the UK by the International Interests in Aircraft Equipment (Cape Town Convention) Regulations 2015 (SI 2015/912) (“the Regulations”). I will refer later to the Regulations, and to the Cape Town Convention and the Protocol in more detail, as well as to the role of an IDERA (an “Irrevocable Deregistration and Export Request Authorisation”), a legal instrument under the Cape Town Convention and the Protocol which is intended to allow a designated party to de-register and export an aircraft, providing legal certainty for international financing and asset management. FWA’s involvement[15]Following the onset of the Covid-19 pandemic, VietJet, like many other airlines, failed to make several of its rental payments. Other airlines were able to renegotiate their position under their leasing arrangements. VietJet, however, ultimately was not. Natixis sent termination notices in respect of the NEO Aircraft on 18 October 2021, and BNP did the same in respect of the CEO Aircraft on 22 and 26 October 2021 (“the Termination Notices”). I will refer to these dates collectively as the “termination date”.[16]An entity within the FitzWalter group – FitzWalter Capital Partners (Financial Trading) Limited (“FWC”) – purchased the outstanding loans in respect of the Aircraft from the original lenders and took assignments of the loans in a series of transactions between 8 October and 29 October 2021 (identified in Judgment 1 at paragraphs 51-52). Picken J recorded in Judgment 1 (at paragraph 53) that the Termination Notices had been co-ordinated behind the scenes by FWC. The validity of the Termination Notices was challenged by VietJet, but in Judgment 1 Picken J determined (as upheld on appeal) that the Termination Notices validly terminated the leases and sub-leases. In Judgment 2, he determined that the termination payments due under the leases and sub-leases totalled some $181.5 million All references to $ figures in this judgment are to US $s. (in addition to sums which had fallen due prior to termination).[17]On 3 November 2021, Natixis and BNP resigned as Security Trustee and FWC was appointed as Security Trustee in succession. Natixis and BNP assigned their rights as Security Trustee to FWC, including their rights under the Lessor Security Assignments and the Lessee Security Assignments. VietJet challenged whether FWC was a permitted assignee, and Picken J in Judgment 1 (again, upheld on appeal) determined they were.[18]FWC then sold its claims to FWA. Under the Claims Assignment Agreements of 8 and 9 November 2021, FWC transferred some, but not all, of its rights as Security Trustee under the Head Leases and Sub-Leases to FWA. The exclusions from the assignment, the first of which was the Excluded Property (which FWC had not, in fact, acquired for any of the Aircraft), and the second of which was referred to as the “Aircraft Excluded Property” (which I refer to in more detail below), were identified at paragraph 22 of Judgment 2.[19]Under the Claims Assignment Agreements, FWC retained its rights to the Aircraft themselves (as part of the Aircraft Excluded Property). FWC then, in January 2022, effected a transfer of the Aircraft, for approximately $138 million, to four affiliated companies of FWC and FWA which had been incorporated on 27 October 2021, one for each Aircraft (referred to in Judgment 2 at paragraph 23, and elsewhere in these proceedings, as “the Trustee Owners”, though no trust existed at the date of these transfers). The transfer to the Trustee Owners took place in the case of the NEO Aircraft by a foreclosure sale under New York law and in the case of the CEO Aircraft following a public auction (which VietJet contended was not a genuine exercise). In August 2022, each of the four Trustee Owners declared trusts of the respective aircraft in favour of FWA.[20]In January 2022, FWA acquired the NEO Excluded Property from the NEO Lessors under a “Participation and Sale Agreement” (dated 11 January 2022). As I have already mentioned, it did not acquire the Excluded Property in respect of the CEO Aircraft. The initial stages of the dispute, redelivery and export of the Aircraft[21]VietJet initially refused to redeliver the aircraft to FWC, and contended that the Leases and Sub-Leases had not been validly terminated. VietJet continued to operate the aircraft for about a year without paying any rent. FWA served Grounding Notices dated 7 April 2022, advising VietJet of the Aircraft’s change of ownership, and demanding the grounding of the Aircraft and their return. These were followed by redelivery demands dated 15 July 2022, requiring the Aircraft to be delivered to Alice Springs airport in Australia (which VietJet contended FWA had no right to demand), and repossession notices dated 1 August 2022 and 8 August 2022. VietJet did not comply with these notices.[22]There was, however, a dialogue that had started to take place between FWA and VietJet. Mr Liam Creaven had been appointed as the Chief Technical Officer at FW Aviation (Support Services) Limited (an entity affiliated with FWA) on 3 February 2022, with responsibility for obtaining redelivery of the Aircraft, maintaining and repairing them and then exporting them from Vietnam. Mr Creaven met with Mr Nguyen Thien Truong of VietJet on 8 November 2022 to discuss matters such as the transfer of registration and maintenance requirements, a meeting to which I return below.[23]Forming a backdrop to those discussions was the fact that FWA had commenced these proceedings at the end of August 2022, which included a claim for interim injunctive relief pursuant to the Regulations. Within the scope of the proceedings, the two sides agreed a Consent Order dated 16 November 2022, under which VietJet agreed to hand over the aircraft to FWA on an “as is, where is” basis, without prejudice to either side’s arguments at trial. VietJet then handed over possession of the aircraft to FWA on 15 December 2021 (the “redelivery date”).[24]Part of the dispute at this third trial related to the condition in which they were returned, including whether they were airworthy at all, let alone being compliant with the more exacting “Return Conditions” required by the lease and sub-lease. FWA contend that three of the Aircraft were not airworthy on redelivery, with MSN 8592 having overdue maintenance tasks, MSN 8906 having fuel leaks, and MSN 8937 having no engines installed. In his evidence, Mr Creaven explained that, in the circumstances in which FWA took redelivery, the sort of lengthy inspections that would usually take place as part of a standard redelivery process were not performed. The condition of the Aircraft on redelivery was recorded in transfer acceptance letters (“the Transfer Letters”). As well as the Aircraft, VietJet provided FWA with 50 boxes of hard copy technical records on the redelivery date.[25]Thereafter, in December 2021 and January 2022, FWA took steps to deregister the Aircraft from the Civil Aviation Authority of Vietnam (the “CAAV”), and to re-register the Aircraft in Guernsey. The reasons why that was done and the consequences of those steps were the subject of evidence and some dispute at this trial, as I explain further below. One important point which I will come back to was that no Export Certificate of Airworthiness (“ECOA”) was issued by the CAAV at this stage. An ECOA is an International Civil Aviation Organisation (“ICAO”) concept, being a technical declaration of compliance that the aircraft is airworthy and meets its approved design, and is issued by the air authority of the exporting country to, and for the benefit of, the air authority of the importing country when aircraft registration is transferred. The air authority of the importing country may inform the authority in the exporting country that they do not require an ECOA. Here, the Guernsey registry issued a letter dated 10 November 2022 stating that it “does not require, but will accept an [ECOA] issued by [CAAV].”[26]However, the Aircraft remained in Vietnam for some considerable time after their deregistration from CAAV. There was work undertaken on the Aircraft to restore them to flight ready condition. The Guernsey Aviation Authority issued the Aircraft with Certificates of Airworthiness on 16 May 2023 (MSN 8577), 3 August 2023 (MSN 8906), 19 September 2023 (MSN 8592) and 20 February 2025 (MSN 8937). However, for three of the Aircraft, it still took some considerable time after each of those dates for the respective Aircraft to be exported from Vietnam. Ultimately, each of the Aircraft was exported on the following dates: 20 June 2024 (MSN 8906), 5 October 2024 (MSN 8577), 10 October 2024 (MSN 8592) and 13 March 2025 (MSN 8937).[27]The reasons why it took that long to export the Aircraft was one of the key factual disputes at this trial. VietJet contends that much of the delay was down to FWA, including decisions taken in relation to maintenance, in relation to deregistering the Aircraft from CAAV, and in FWA’s alleged lack of understanding of what would be required to export the Aircraft from Vietnam. FWA, as dealt with further below, for its part pointed to aspects of VietJet’s conduct which it said had caused delay and difficulty. That included conduct that has already featured in these proceedings at the previous trials: i) First, during the early part of 2023 there were legal proceedings taken in Vietnam referred to as the “Shareholder Proceedings”. Picken J explained what took place at Judgment 1, paragraphs 76 to 91. The Court of Appeal Judgment set out a summary at paragraph 21: “…on 16 February 2023 proceedings in Vietnam were commenced by Silva Star Capital PTE Ltd (‘Silva Star’), a Singaporean company and a minority shareholder in VietJet, seeking an annulment of the CAAV decisions to deregister the aircraft and interim relief suspending the implementation of the deregistration. Such interim relief was granted by the Hanoi Court on 23 February 2023. There were financial links between Silva Star and VietJet, and between Silva Star’s parent, Polar Star, and VietJet. VietJet’s apparent founder, Madam Thao, was Silva Star’s ultimate beneficial owner and controlling party. She was also at the time proceedings were commenced VietJet’s General Director, and one of its three statutory legal representatives. VietJet’s then Vice General Director, Dr Phuong, another of its statutory legal representatives, was a director of Polar Star. After complaint from FWA on 26 February 2023, VietJet wrote to Silva Star inviting it to withdraw its claim. Between 8 and 13 March three other shareholders lodged claims before the court seeking the same relief. Silva Star applied on 21 March 2023 to discontinue its claim and discharge the injunction, but identical interim relief was granted to the three new shareholders in support of their claim on 23 March, in place of the relief which had been granted to Silva Star. Their claim was discontinued and this injunction was discharged on 4 April 2023.” ii) Second, FWA alleged that, despite VietJet taking the official line that it consented to export of the Aircraft, VietJet corresponded with the Vietnamese authorities behind the scenes in a way which Picken J described (at paragraph 380 of Judgment 1) “shows very clearly that VietJet has sought to interfere with efforts to export the Aircraft” (and he set out at paragraphs 381 to 387 of Judgment 1 a summary of the correspondence in question). The impact of the Shareholder Proceedings and of that correspondence on the delay to the export of the Aircraft was disputed between the parties at this trial. Subsequent sale and lease of the Aircraft[28]As Picken J recorded at Judgment 2, paragraphs 25 to 26, on 19 December 2024 (for MSN 8592, MSN 8906 and MSN 8577) and on 13 March 2025 (for MSN 8937), legal title to each of the Aircraft was sold by the relevant Trustee Owners to FWA, and the trusts were terminated. On 22 May 2025, legal title to the Aircraft was transferred to FitzWalter Group entities which are not subsidiaries of FWA.[29]The NEO Aircraft were then leased to Turkish Airlines in June 2025. The CEO Aircraft were sold to Sub Phu Quoc Airways in August 2025. Key contractual provisions[30]The leases and the sub-leases for the NEO Aircraft and the CEO Aircraft were on similar, but not identical, terms. Moreover, in respect of the NEO Aircraft, FWA acquired the Excluded Property, and therefore was able to pursue certain claims in respect of the NEO Aircraft that it was not able to do in respect of the CEO Aircraft (most notably the claim for an indemnity in respect of putting the NEO Aircraft into a condition compliant with the Return Conditions). It is therefore necessary to keep in mind, in respect of each head of claim, which of the NEO Aircraft and the CEO Aircraft the claim relates to, and which contractual provisions are said to be available in respect of that claim.[31]I will identify the key contractual provisions of the sub-leases that were relied upon by FWA. It is important to see the terms of each of them at the outset, in particular in light of the submissions made by Mr Thompson KC, on behalf of VietJet, on construction and as to how the various indemnities relied upon by FWA did, or did not, overlap. Excluded Property[32]As I have mentioned, the Excluded Property was a feature of the leasing and security arrangements for both the CEOs and the NEOs. However, given that FWA acquired the Excluded Property for the NEOs, but not for the CEOs, it is in the context of the claims in respect of the CEOs where it is most relevant. For the CEOs, the definition of Excluded Property is found in the Head Lease (the definition in the sub-lease simply cross-referring to that in the Head Lease), with 12 sub-paragraphs, of which those material to this dispute include the following:
“Excluded Property” means any and all of the following: (a) any B Rental, Termination Value B, Special Termination Value B, Low Termination Value B and Purchase Option Price B, in each case payable by the Lessee under this Agreement; (b) any and all amounts payable by the Lessee to or for the account of any Relevant Person or any Kumiai-in[ A “Kumiai-in” means “any person that enters into a Tokumei Kumiai Agreement with the Lessor for the purpose of the Lease and the other Operative Documents and any assignee of such person.”
The Tokumei Kumiai was the corporate vehicle through which the Japanese equity investors participated in the JOLCO. ] and any and all rights of any Relevant Person or any Kumiai-in under Clauses 9.1.6 (Withholding Taxes), 9.2 (Tax Indemnity), 9.3 (Contest Rights), 10 (Fees and Expenses), 20 (Return of Aircraft), 23.1 (General Indemnity), 23.4 (Indemnity Payments made without deduction or withholding), 23.6 (Payments) or 23.7 (Default Indemnity); … (k) any and all rights, powers, remedies, options, discretions, privileges and interests of the Lessor under this Agreement and the other Operative Documents (including, without limitation, rights to demand, determine, nominate place of payment, collect and enforce) to the extent that they accrue to the Lessor in respect of the matters described in paragraphs (a) to (j) inclusive above, and all proceeds relating to or arising from the foregoing including, without limitation, all moneys and other property at any time and from time to time receivable or distributable in respect thereof and all causes of action arising under and all moneys and claims for damages and for moneys due or to become due under any of the foregoing excluding any right to repossess the Aircraft and/or to enter into any contract for, or conclude, the sale of the Aircraft to any person (other than the Lessee or a nominee of the Lessee) and excluding any right to give a Notice of Termination under Clause 19.1(b) (Termination of Lease Period) in relation to an Event of Default which has occurred and is continuing, specified in Clause 18(h), (i), (j) or (k) (Events of Default); (l) any and all rights of the Lessee and any and all amounts payable by the Sub-Lessee in each case under the Sub-Lease which correspond to any Excluded Property described in paragraphs (a) to (m) inclusive above.”[33]A “Relevant Person” was defined as:
“the Lessor, the Parent, the Inspection Agent, the Remarketing Agent and their respective and any subsequent respective successors, permitted transferees and assigns, officers, directors, servants, agents and employees provided that any Financing Party and its and any subsequent successors, transferees and assigns shall not constitute a Relevant Person.”
[34]And “Financing Party” meant any of: “the Security Agent, the Facility Agent, the Fixed Rate Provider and the Lenders”.[35]The result of the above, as was common ground, was that FWA could not bring certain claims (which it did pursue in respect of the NEOs) in respect of the CEOs, including those under clauses 10.2, 20 and 23.7. It did, however, bring claims in respect of the CEOs under clause 23.1 because (as was accepted by VietJet), that clause was “Excluded Property” only insofar as it constituted rights of a “Relevant Person” which, as a successor in title to a Financing Party (namely, the Security Trustee), did not include FWA. As set out below, clause 23.1 in the CEO agreements was drafted to include a Financing Party. Clause 10.2[36]This was relied upon by FWA in relation to the NEOs. It was Excluded Property and, by the time of trial, FWA acknowledged it could not rely on it in respect of the CEOs. It provided as follows: There were minor differences between the wording of this clause for the NEOs and the CEOs, but neither party suggested they were material to the issues. “10.2 Subsequent Costs The Sub-Lessee shall on demand pay or reimburse the Sub-Lessor for all fees and expenses (including, without limitation, legal and accounting fees and expenses) and out of pocket costs and expenses incurred by it(a) in connection with any amendment, alteration, variation, consent or approval requested or required by the Sub-Lessee (other than costs and expenses expressly assumed by the Lessor under Clause 8.3 (Mitigation)) to implement this Agreement or any Operative Document or(b) in connection with any preservation or enforcement of any of the rights of the Sub-Lessor, any Indemnitee or Tax Indemnitee hereunder or thereunder.”[37]The part of this clause covered by (b) was relied on by FWA in respect of its claim to what it referred to as the “enforcement costs”. Clause 20[38]Clause 20.1 was only relied upon by FWA in relation to the NEOs as it, too, was Excluded Property. It provided:
“20. RETURN OF AIRCRAFT 20.1 Return of Airframe and Engines Upon the expiry or earlier termination of the Lease Period, … the Sub-Lessee shall return the Aircraft and the Technical Records (which shall be updated and maintained by the Sub-Lessee up to the time of Return in accordance with the requirements of this Agreement), at the Sub-Lessee's sole cost and expense, to the Redelivery Location on the Expiry Date or the date on which the leasing of the Aircraft hereunder is terminated, as the case may be. It is explicitly agreed that the Sub-Lessor shall only act in accordance with the instructions of the Lessor in relation to the return of the Aircraft under this Clause 20 and Schedule 4. The Sub-Lessee shall, at the Sub-Lessee's sole cost and expense, procure that at the time of such return: (a) the Aircraft shall be duly registered with the Aviation Authority[ “Aviation Authority” was defined as: “each authority or Government Entity which, under the laws of the State of Registration from time to time: (a) has control or supervision of civil aviation in that state; or (b) has jurisdiction over the registration, airworthiness or operation of, or other matters relating to, the Aircraft or any part thereof, including, as at the Delivery Date, the Civil Aviation Administration of Vietnam ("CAAV").” ] (unless deregistered in accordance with steps taken pursuant to paragraph (h) below); (b) the Aircraft shall be in a condition enabling it to be duly certified as airworthy by EASA[ The European Aviation Safety Agency, and any successor thereof. ] and the Aviation Authority; (c) the Aircraft shall be free and clear of all Security Interests (except Lessor Security Interests and Financing Party Security Interests (as defined in the Loan Agreement)); (d) the Aircraft shall comply with the Return Conditions; (e) all Technical Records shall have been maintained in accordance with the regulations of EASA and the Aviation Authority and the requirements of this Agreement and shall be returned with the Aircraft; (f) to the extent permitted under Clause 14.7(d), if the Sub-Lessee has made any Equipment Change or other modification, alteration or addition to, or removal from, the Aircraft or any Engine then, if requested by the Sub-Lessor, the Sub-Lessee shall restore the Aircraft or such Engine to its original delivery condition as if no such Equipment Change, modification, alteration, addition or removal had been made (except any such Equipment Change, modification, alteration, addition or removal as was required by the Aviation Authority, the FAA, EASA or the Manufacturer) but only to the extent that any such non-mandatory modification, alteration, addition or removal has not otherwise irreversibly altered the structure of the Aircraft; (g) the Aircraft shall have had its paint removed at the Sub-Lessor's option by sanding or stripping and be freshly painted per the requirements of paragraph 5 of Part A of Schedule 4 (Return Conditions); and (h) any steps requested by the Sub-Lessor have been taken to effect the de registration of the Aircraft from the register of aircraft maintained by the Aviation Authority.”
[39]The “Return Conditions” referred to the return conditions set out at Schedule 4 of the sub-lease. As explained further below, this was an exacting set of conditions, in many ways equivalent to having to put the aircraft in an “as good as new” state. Picken J explained at paragraph 355 of Judgment 1 that the “requirement to comply with the redelivery conditions protected the Japanese investors against the potential volatility in the Aircrafts’ value and improved their prospects of selling the Aircraft quickly and at a reasonable price.” As a shorthand in this judgment, I will use “the Return Condition” to refer to the condition required by the Return Conditions in the sub-lease.[40]Clause 20.4 was headed “non-compliance” and provided as follows: Clause 20.4 for the CEOs was slightly different, providing instead of “the Lease Period shall be extended” that the “Sub-Lessee may elect to extend the Lease Period”. “If at the time of Final Inspection the Sub-Lessee has not fully complied with any of its obligations under this Agreement (including without limitation the Return Conditions), or the Sub-Lessee fails to make the Aircraft available to the Sub-Lessor on a timely basis for inspection and redelivery pursuant to Clause 20.1 (Return of Airframe and Engines) and the Return Conditions (whether such failure is due to any act or omission of the Sub-Lessee or any other circumstance whatsoever), the Lease Period shall be extended or if the Lease Period has already ended be deemed to be extended until the time when the Aircraft has been redelivered to the Sub-Lessor in full compliance with this Agreement, for the sole purpose of enabling such non-compliance or failure to be promptly rectified, and during such extension or deemed extension period:(a) the Sub-Lessee shall not use the Aircraft in flight operations;(b) all the Sub-Lessee's obligations and covenants under this Agreement will remain in full force until the Sub-Lessee so redelivers the Aircraft, and(c) the Sub-Lessee shall pay the Sub-Lessor the Rental for such extension period on demand at the rate of one hundred and fifty per cent (150%) of the Rental payable on the next scheduled Rental Payment Date or the Expiry Date (as applicable), calculated on a per diem basis. Any such extension or deemed extension shall not prejudice the right of the Sub-Lessor to treat such non-compliance or failure as an Event of Default at any time, and to enforce such rights and remedies as may be available to the Sub-Lessor in respect thereof under the terms of this Agreement or applicable law. Without limiting the generality of the foregoing, the Sub-Lessee's Rental obligation under paragraph (c) above shall be without prejudice to the rights of the Sub-Lessor to terminate the leasing of the Aircraft, to indemnification and to receive any amounts in each case in accordance with the provisions of this Agreement. The Sub-Lessor may, at its sole discretion (and shall not be obliged to) elect (either on first tender of the Aircraft by the Sub-Lessee or at any time during the said extension or deemed extension period) to accept redelivery of the Aircraft notwithstanding non-compliance with Clause 20.1 (Return of Airframe and Engines) or the Return Conditions, in which case the Sub-Lessee will indemnify the Sub-Lessor in respect of the cost (as reasonably determined by the Sub-Lessor following consultation with the Sub-Lessee) of putting the Aircraft into the condition required by this Agreement.”[41]FWA’s claim in respect of the NEOs under sub-clause (c) of clause 20.4 was dealt with in Judgment 2. There, Picken J held that the obligation to pay the “Rental” for the period between termination of the leasing and the date of redelivery of the aircraft by VietJet was an amount payable by way of liquidated damages, and FWA was entitled to the sums due under that part of the clause (see Judgment 2, paragraphs 148 to 175). The key part of the clause relied upon by FWA at this third trial was the final paragraph, providing the Sub-Lessee’s obligation to indemnify in respect of the cost of putting the aircraft into the Return Condition.[42]Other parts of clause 20 also figured in the parties’ arguments, as I refer to further below, even where they were not relied upon by FWA as the basis for one of its claims. These include clause 20.7, dealing with storage of the aircraft post redelivery, which VietJet relied upon as identifying the scope of the remedy for a claim based upon the costs of such storage:
“20.7 Storage Upon Return Upon redelivery but subject to twenty (20) days' prior written notice from the Sub-Lessor, the Sub-Lessee shall provide the Sub-Lessor, at the Sub-Lessee's expense, with, or procure for the Lessor, storage facilities for the Aircraft for a period not exceeding ninety (90) days on the terms set out in paragraph 14 of Part A of Schedule 4 (Return Conditions). Without prejudice to any other indemnity obligations of the Sub-Lessee in this Agreement or any other Operative Document, the Sub-Lessee shall indemnify the Sub-Lessor and the Lessor and keep the Sub-Lessor and the Lessor indemnified against any losses incurred or suffered by the Sub-Lessor or the Lessor in connection with the storing, preservation, maintenance, insurance, protection, sale or other disposal of the Aircraft during such period.”
Clause 23[43]Clause 23 was headed “Indemnities” and contained a series of provisions requiring the Sub-Lessee to indemnify the Sub-Lessor (and, in some circumstances, others) in various circumstances. Heavy reliance was placed by FWA upon clause 23.1:
“23.1 General Indemnity Subject to Clause 23.2 (Exceptions to General Indemnity), the Sub-Lessee hereby agrees at all times to indemnify and hold the Sub-Lessor, the Lessor and the Lessee Parent and their respective successors, permitted transferees, permitted assigns, officers, directors, agents, affiliates and employees (collectively "Indemnitees" and each an "Indemnitee") harmless from and against all and any Losses of whatsoever kind and nature and regardless of when the same shall arise (whether prior to, during, or after termination of, the Lease Period) which may from time to time or at any time be imposed on, suffered or incurred by or asserted against any Indemnitee (whether or not any such Losses are also indemnified or insured against by any other person) relating to, arising out of or resulting from (whether directly or indirectly): (a) the purchase, ownership, title, registration, delivery, non-delivery, redelivery, performance, acceptance, non-acceptance, rejection, import, export, re-registration, de-registration, financing, certification, insurance, mortgaging, hypothecating, supply, lease, hire, charter, sub lease, sub-sublease, "wet lease", possession, presence, location, stationing, use, operation, accident, damage, loss, transportation, management, assignment, control, manufacture, design, condition, maintenance, alteration, modification, improvement, refurbishment, repair, service, overhaul, testing, removal, replacement, repossession, foreclosure, substitution, pooling, interchange, storage, sale, remarketing, return, redelivery, exchange or disposition of the Aircraft, the Airframe, any Engine or any Part or any interest therein or any title thereto or the Technical Records or destruction of or damage to any property, or death or injury of, or other Loss of whatsoever nature suffered by, any person caused by, relating to or arising from or out of any of the foregoing matters (either in the air or on the ground) whether or not such Losses may be attributable to any defect (including, without limitation, latent or other defects whether or not discoverable) in the Aircraft, the Airframe, any Engine or any Part or any interest therein or any title thereto or the Technical Records or attributable to the design, testing or use thereof or from any maintenance, service, repair, overhaul, or to any other reason whatsoever (whether similar to any of the foregoing or not); (b) any design, article or material in the Aircraft, the Airframe, any Engine or any Part or any interest therein or any title thereto or the Technical Records or the operation or use thereof constituting or being alleged to constitute an infringement of patent, trademark, copyright, design or any other proprietary right or a breach of any obligation of confidentiality owed to any person in respect of any of the matters referred to in this paragraph (b); or (c) after the occurrence of a Potential Event, preventing or attempting to prevent the arrest, confiscation, seizure, taking in execution, impounding, forfeiture or detention of the Aircraft, any Engine or any Part, or in securing the release of the Aircraft, any Engine or any Part; or (d) any Total Loss in relation to the Aircraft, the Airframe, any Engine or Part (excluding Losses incurred by any Indemnitee to the extent such Indemnitee is compensated from any insurance proceeds or if the A Line Termination Value has been paid in accordance with this Agreement); or (e) any act or omission which invalidates or which renders voidable any of the Insurances, If a claim is made against an Indemnitee (such Indemnitee, in each case, being the "Affected Indemnitee") which is likely to result in Losses to such Affected Indemnitee in respect of which the Sub-Lessee is obliged to indemnify the Affected Indemnitee under this Clause 23.1 (General Indemnity), then, provided no Potential Event or Excepted Reason has occurred and is continuing, the Affected Indemnitee shall, if requested by the Sub-Lessee, consult with the Sub-Lessee to consider what action (if any) may properly be taken to contest such a claim. …”
[44]The clause went on to set out terms on which the “Affected Indemnitee” could take action if it determined to contest such a claim, and the indemnification obligations of the Sub-Lessee that related to such action and otherwise.[45]Clause 23.2 set out a number of “Exceptions to the General Indemnity” in a series of sub-paragraphs (a) to (j). At one stage, VietJet relied upon clause 23.2(c) which provided an exception for gross negligence or wilful misconduct. However, by the end of the trial, VietJet made it clear that it did not maintain that FWA’s conduct constituted gross negligence or wilful misconduct and that it no longer relied upon clause 23.2(c). The opening words of the clause, however, provided that none of the exceptions applied where the exclusion or any of the excluded Losses referred to therein:
“…arises or is imposed on, suffered or incurred by or asserted against such Indemnitee as a result of a Potential Event or an Excepted Reason, …”
[46]One of the exceptions, at clause 23.2(b), which it is difficult to see would ever be subject to the opening words of the clause disapplying the exception, provided that the Sub-Lessee would have no liability with respect to any Losses:
“(b) imposed upon such Indemnitee to the extent incurred in respect of any period after the earliest to occur of any of the following events: (i) the purchase of the Aircraft by the Sub-Lessee or by a third party pursuant to the terms of this Agreement and the performance in full by the Sub-Lessee of its obligations then due hereunder; (ii) the return of the Aircraft to the Sub-Lessor pursuant to and in accordance with the provisions of this Agreement and the performance in full by the Sub-Lessee of its obligations then due hereunder; or (iii) the termination of the Lease Period in accordance with Clause 17 (Loss and Requisition) following a Total Loss with respect to the Aircraft and the performance in full by the Sub-Lessee of its obligations then due hereunder, unless such Losses are attributable to any event, circumstance or condition occurring prior to such purchase or return or termination; …”
In other words, once the Aircraft is purchased by the Sub-Lessee, or returned to the Sub-Lessor, pursuant to the terms of the sub-lease, or there is a total loss, and when the Sub-Lessee has performed all its obligations in full, its indemnity obligations under clause 23.1 cease. (i) the purchase of the Aircraft by the Sub-Lessee or by a third party pursuant to the terms of this Agreement and the performance in full by the Sub-Lessee of its obligations then due hereunder; (ii) the return of the Aircraft to the Sub-Lessor pursuant to and in accordance with the provisions of this Agreement and the performance in full by the Sub-Lessee of its obligations then due hereunder; or (iii) the termination of the Lease Period in accordance with Clause 17 (Loss and Requisition) following a Total Loss with respect to the Aircraft and the performance in full by the Sub-Lessee of its obligations then due hereunder, unless such Losses are attributable to any event, circumstance or condition occurring prior to such purchase or return or termination; …”[47]The indemnity in clause 23.1 constitutes Excluded Property for the NEOs, but as FWA acquired the Excluded Property under the Participation and Sale Agreement it is still able to bring claims under it. Clause 23.1 in respect of the CEOs was in substantially similar terms, save that the indemnity under clause 23.1 of the agreements for the CEOs extends to indemnifying and holding harmless:
“…the Sub-Lessor, and each Relevant Person, each Kumiai-in and each Financing Party and their respective and any subsequent respective successors, affiliates, officers, directors, servants, agents, employees, attorneys and managers (collectively “Indemnitees” and each an “Indemnitee”).”
[48]As noted above “Relevant Person” includes (among others) the Lessor, but excludes any Financing Party. Given that “Financing Party” included the Security Trustee, of which FWA was the assignee of rights pursuant to the Claims Assignment Agreements, it was accepted that FWA is entitled to enforce clause 23.1 under the CEO Agreements, except to the extent that the rights in question constitute the rights of any Relevant Person or any Kumiai-in. In other words, in respect of the CEOs, FWA can make such a claim as the assignee of, or affiliate of, a Financing Party, but cannot make a claim in the shoes of a Sub-Lessor.[49]Clause 23.3 provided that all indemnities under the sub-lease agreements survived termination of the leasing and of the sub-lease agreements:
“23.3 Continuation of Indemnities The rights of the Sub-Lessor, each Indemnitee and each Tax Indemnitee in respect of each and every indemnity contained in this Agreement, subject to the express provisos and exceptions thereto (if any), shall continue in full force and effect in favour of each such person notwithstanding the expiry or termination of this Agreement, the Lease Period or the leasing hereunder for any reason whatsoever, and notwithstanding any breach by the Sub-Lessor, the Lessor, the Sub-Lessee or any other person of the terms of this Agreement or any other Operative Documents, any cessation of business of, dissolution of, or any change in the constitution of the Sub-Lessor, any Indemnitee, any Tax Indemnitee or the Sub-Lessee, or any other fact, event or circumstance of any kind whatsoever, whether similar to any of the foregoing or not.”
[50]Clause 23.7 provided an indemnity in respect of Losses arising out of or resulting from any breach by VietJet of its obligations under the sub-leases:
“23.7 Default Indemnity The Sub-Lessee shall indemnify the Sub-Lessor upon demand against any and all Losses of whatsoever kind and nature which may from time to time or at any time be imposed on, suffered or incurred by or asserted against the Sub-Lessor relating to, arising out of or resulting from (whether directly or indirectly) any breach by the Lessee of any of its obligations under this Agreement or under any other Operative Document (including, without limitation, any exercise by the Sub-Lessor or any Indemnitee of any of its rights hereunder or thereunder in relation thereto), any Potential Event or any Event of Default.”
[51]Clause 23.7 was Excluded Property, and therefore was relied upon by FWA only in respect of the NEO Aircraft.[52]FWA had also pleaded claims under clauses 23.9 and 25.11. However, FWA made clear at the trial that it no longer maintained any claim under clause 23.9, and that it had no claim under clause 25.11 which was wider than available under clause 23, and no submissions were directed to recovery under that clause. In the circumstances, I do not deal further with those provisions.[53]Also relevant, at least to the claims in respect of the CEOs, is the clause of the sub-leases dealing with third party rights. In the CEO sub-leases it was clause 26.3, The equivalent clause in the NEO sub-leases was clause 26.6, which was on slightly different terms. which provided as follows:
“26.3 Third Parties Any person which is a Lessee Party, a Relevant Person, a Financing Party, an Indemnitee, a Tax Indemnitee or an Additional Insured from time to time and is not a party to this Agreement shall be entitled to enforce such terms of this Agreement as provided for the obligations of the Sub-Lessee to such Financing Party, Indemnitee, Tax Indemnitee or Additional Insured, as the case may be, in each case, subject to the provisions of Clauses 26.1 (Law) and 26.2 (Jurisdiction) and the Contracts (Rights of Third Parties) Act 1999 (the “Third Parties Act”). The Third Parties Act applies to this Agreement as set out in this Clause 26.3 (Third Parties). Save as provided above, a person who is not a party to this Agreement has no right to use the Third Parties Act to enforce any term of this Agreement and, subject to the other provisions of the other Operative Documents, the parties to this Agreement do not require the consent of any third party (including, without limitation, any Indemnitee, Tax Indemnitee or Additional Insured who is not a party to this Agreement) to amend or rescind this Agreement at any time.”
Judgment 1 and Judgment 2[54]In Judgment 1, Picken J determined issues as to liability, including that the leasing of the Aircraft had been validly terminated in October 2021, and that FWA had taken valid assignments of rights, such that it had standing to bring the claim. Although not dealt with expressly in Judgment 1, in the Court’s order made on hand down on 31 July 2024, VietJet was ordered to pay $11.3m for accrued debts (mainly for unpaid rent accrued prior to the termination of the Sub-Leases).[55]In Judgment 2, Picken J determined certain issues relating to quantum, including whether VietJet was liable to make the payments provided for in clause 19.3(a) of the Sub-Leases. VietJet argued they were penal and irrecoverable. Picken J decided that this was not a penalty clause and held that VietJet was liable to pay about $165 million as liquidated damages (plus interest) under cl.19.3(a). In respect of what was termed the “A Line Termination Value” for the NEO Aircraft and the “Termination Value A” for the CEO Aircraft. Included in this amount was a sum In respect of the NEO Aircraft this was the “Basic Termination Amount” and in respect of the CEO Aircraft this was the “Termination Value A”. that had been calculated by the terms of the leases/sub-leases to reflect the outstanding balance of the loans repayable by the Lessors to the Lenders on the termination date. In respect of the NEO Aircraft, it also included a sum corresponding to the equity finance provided by the Japanese investors, in addition to their bargained-for return, discounted for early receipt but adjusted to reflect their loss of favourable tax treatment. The “A Termination Amount”. These amounts were explained at Judgment 2, paragraphs 29 to 30.[56]Picken J also awarded an additional approximately $17m (plus interest) to FWA under clause 20.4(c) in relation to the NEO Aircraft only, representing (in general terms) “Rental” at 150% of the contractual rate for the period between the termination date and the redelivery date.[57]As a result of the proceedings to date, therefore: i) FWA has taken possession of the Aircraft, and is now enjoying their value – the NEOs are under lease to Turkish Airlines, and the CEOs have been sold. ii) VietJet was ordered to pay $11.3m for accrued debts under Judgment 1. iii) VietJet was ordered to pay about $165 million, which effectively represents payment of the outstanding loan balance for each of the Aircraft plus (for the NEO Aircraft) an amount compensating the equity investors as explained above. iv) VietJet was ordered, in respect of the NEOs, to pay about $17m as liquidated damages for loss of use of the NEO Aircraft in the period between the termination date and the redelivery date. Losses now claimed[58]As I have set out above, FWA has succeeded in certain claims already. In addition to the amounts awarded to it thus far, FWA now seeks to make recovery in the following categories: i) Losses relating to the repair, maintenance and operation of the Aircraft after the redelivery date. These include in general terms: a) In relation to the NEO Aircraft: i) a claim based on VietJet’s failure to put the Aircraft into the Return Condition. This claim is made under clause 20.4. (References to clause numbers are to clauses of the relevant sub-lease unless otherwise stated). ii) a claim for maintenance/storage/operation (and other costs) until the Aircraft left Vietnam, plus some further costs post-export from Vietnam. This claim is made under clauses 20.4, 23.1 and 23.7. b) In relation to the CEO Aircraft, a claim for repair to airworthy condition, and maintenance/storage/operation (and other costs) until the Aircraft left Vietnam, plus some further costs post-export from Vietnam. This claim is made under the clause 23.1 indemnity. FWA had also pleaded a claim in respect of the CEOs under clauses 12-14 of the sub-leases, as an alternative basis for claims which had at one point figured in the FCAS as “claim 3”. Mr Shah confirmed in his oral opening that this claim had fallen away, and it was not pursued at trial (nor was it or these provisions of the sub-leases mentioned in the agreed list of live issues filed at the time of oral closing submissions, or dealt with in the parties’ closing submissions themselves). Accordingly, I do not refer to it further. ii) For all the Aircraft, an indemnity under clause 23.1 (and, in respect of the NEOs, clause 23.7) for lost rental income for the period in which FWA says it was unable to lease the aircraft following the termination date. For the NEOs, FWA claims only from the redelivery date (given the order for payment under clause 20.4(c) in Judgment 2 in respect of the period between the termination date and the redelivery date in respect of the NEOs). For the CEOs, FWA claims from the termination date. iii) For all the Aircraft, an indemnity in respect of what FWA terms its costs of enforcement. This is brought under clauses 10.2, 23.1 and 23.7 for the NEO Aircraft and clause 23.1 for the CEO Aircraft. iv) A claim in conversion and/or mesne profits in respect of VietJet’s alleged unlawful use of the Aircraft between the termination date and the redelivery date. This claim overlaps with other of FWA’s claims (and FWA made it clear it would not seek double recovery).[59]FWA claims these losses up to 22 May 2025 (referred to in some of the expert material as the “Third Cut-off Date”).[60]VietJet brings a counterclaim against FWA. This is a claim in conversion in respect of FWA’s alleged unauthorised use of two engine stands on which the off-wing engines from MSN 8937 were returned to FWA on 15 December 2022. This claim amounts to $487,188. The Trial Factual evidence[61]The only factual witness to give live evidence at the third trial was Mr Creaven who, as I have mentioned above, was the Chief Technical Officer at an FWA affiliate, and was responsible for planning and subsequently managing the redelivery, maintenance and repair of the Aircraft. He sought to explain the condition of the Aircraft at the redelivery date, the steps taken by FWA to repair and maintain the Aircraft thereafter, and the process undertaken to export the Aircraft from Vietnam. Much of his evidence related to the costs incurred by FWA from the redelivery date to the 22 May 2025 cut-off date.[62]In the witness box, Mr Creaven was prone to give speeches and, from time to time, to seek to promote FWA’s case. He gave the impression of being deeply invested in the detail of the case and seemed to have a well-versed appreciation of the issues between the parties, and was keen to get his point across in answer to the question he thought was the right one to have asked or one he anticipated was coming down the line, even when it had not (yet) been asked. He was sometimes evasive and gave long answers that did not respond to the question asked. He came into the witness box ready to “fight his corner”. This was perhaps not that surprising, given his close involvement in the detail of the exercise relating to recovery of the Aircraft for a number of years, and the entrenched positions the opposing parties appear to have taken throughout this litigation. This had the effect that, not only did some of his evidence not directly address the question he was being asked, but there was also a certain defensiveness to much of his evidence. Nonetheless, he was seeking to give honest evidence, albeit tailored in terms of presentation to what he thought suited FWA’s case.[63]FWA also relied on a short extract from the witness statement of Mr Adam Weinstock, which had been served for the first trial (at which Mr Weinstock had been cross-examined). This related to a short point about FWA’s liability for certain costs in relation to which it sought an indemnity. I refer to it further at paragraphs ‎142 to ‎150 below. Expert evidence[64]Expert evidence was adduced by both parties from experts in two fields: i) Experts in aircraft maintenance, who gave evidence about FWA’s costs relating to the repair, maintenance and operation of the Aircraft, including the reasonableness of those costs. ii) Experts in aircraft valuation, who gave evidence on(a) market lease rates for the Aircraft (in relation to FWA’s claims for lost rental) and(b) the difference in the value of the NEO Aircraft between their value in the condition they were in on redelivery and their value had they been in the Return Condition (which is relevant to an alternative claim made in respect of the failure to return the NEO Aircraft in such a condition).[65]In relation to aircraft maintenance/repair, FWA relied on the evidence of Mr Peter Bull, of Horizon Aerospace. In relation to aircraft valuation, FWA relied on the evidence of Mr Douglas Kelly, of AVITAS Inc. VietJet relied on the same expert to give evidence in both fields – Mr Clifford Brown, of International Aviation Services Group.[66]Both Mr Bull and Mr Brown clearly had detailed expert knowledge in relation to aircraft operation, recovery and maintenance. They have both worked in the aviation industry for a considerable period of time (Mr Bull having started as an Aircraft Engineering Apprentice in 1980 and Mr Brown an Aircraft Technician Apprentice in 1981) and have each progressed through various technical and management and executive roles with airlines and other companies and organisations in the aviation industry to a senior level. Both had detailed technical knowledge as well as knowledge and experience of aircraft ownership and leasing.[67]Each has spent a substantial amount of time going through the detail of the claims. In Mr Bull’s case, this included building the very detailed FCAS (which I identify and explain below), much of which was built on information and spreadsheets he had received from FWA, and there had clearly been a degree of to and fro between Mr Bull and FWA as the former sought to understand certain aspects of the details of the claim, and FWA then sought to explain them and provide information. In Mr Brown’s case, his evidence comprised not only his evidence responding to Mr Bull, but also evidence on aircraft valuation and lease rates, and he had clearly spent a great deal of time considering matters in relation to both topics on which he gave his expert evidence. Mr Bull and Mr Brown clearly had respect for each other and for each other’s work. For each of them, however, their degree of involvement did in places appear to have led them to get slightly too close to their respective instructing party’s case, such that their evidence crossed the line into a form of advocacy. This was by no means pervasive, but rather occasional. I felt that from time to time each of them struggled with their ability to retain complete objectivity. The result was that whilst, for the most part, each was seeking to assist the court and give objective and independent evidence, for each of them there were flaws in parts of their evidence. I deal with the detail of the evidence where this is material to the issues I have to decide below.[68]Mr Kelly is the CEO and the Chief Appraiser at AVITAS Inc, an aviation consulting company based in Virginia, USA, which publishes one of the industry standard value references for commercial aircraft, generally known as the AVITAS BlueBooks. Mr Kelly has been at AVITAS since 1997, having had a history in the aviation industry prior to that. Mr Kelly clearly has expertise in aircraft valuation and lease rates, and comes with impressive credentials. I do not doubt he was seeking to assist the court and to give independent expert evidence. There was some criticism, which to an extent was justified, that his reports showed little of his “working” in assessing lease rates, but rather just read figures from the historic AVITAS data, though there was nothing to suggest that the rates had not been reached as a result of careful analysis, and they represented what AVITAS genuinely thought were accurate reflections of the market at the time they were published.[69]Expert reports had also been filed by both parties from accountants who had calculated the amounts claimed under various heads, based upon the other expert reports. Neither was called to give evidence, and I was not asked to read their reports or take a view on their evidence. Occasional reference was made to their material at trial, but only by way of convenient direction to where certain figures could be found. The FCAS[70]A key part of the presentation of FWA’s case in relation to the losses identified at paragraph ‎58.i) above was a spreadsheet referred to as the “Final Claims Assessment Sheet”, referred to by both parties throughout the trial as the “FCAS”. The FCAS was served with Mr Bull’s third report, although parts of its contents derived from Mr Creaven and FWA, and it was used as a vehicle for the identification of the different parts of the claim for those losses. In its summary tab, it recorded both experts’ views on the various categories of claim, and in the supporting tabs it set out the figures (and some of the explanation) behind Mr Bull’s figures. It broke these losses down into a number of categories referred to as follows: i) Claim 1: Project management, technical support and remarketing. ii) Claim 2: Aircraft parking, storage and preservation. iii) Claim 3: CEO Sub-Lease Agreements non-compliance. iv) Claim 4: NEO Sub-Lease Agreements non-compliance. v) Claim 5: Loss of aircraft maintenance and component utility. vi) Claim 6: Aircraft re-registration and regulatory compliance. vii) Claim 7: Return of the Aircraft to flight ready condition and ongoing maintenance. viii) Claim 8: Non-revenue flights and Aircraft insurance. ix) Claim 9: Other costs incurred post 30 June 2024 (which FWA referred to as the “second cut-off date”).[71]Claim 3 was FWA’s claim for damages for losses arising from VietJet’s alleged failure to maintain the CEO Aircraft in accordance with the terms of the sub-lease. To the extent that the costs of remedying the position had been incurred by FWA, those costs (even if originally claimed under claim 3) were “moved” by FWA to its claim under claim 7. FWA made it clear in its written opening for trial that it no longer maintained its damages claim for those defects that had not been addressed prior to the sale of the CEO Aircraft in August 2025.[72]Claim 4 constitutes the claim under clause 20.4 in relation to the NEO Aircraft, based on the fact that they were not redelivered in the Return Condition.[73]Claims 1-2 and 5-9 concern losses that FWA alleges it has suffered following redelivery of the Aircraft, both CEOs and NEOs. The overarching issues[74]I have summarised above the claims that FWA now brings. VietJet seeks to defend those claims on a variety of grounds, some of them by way of points of principle, some on individual points of detail, a number of which depend on a detailed consideration of the competing expert evidence.[75]There are a number of overarching points which affect a number of the claims which it is convenient to deal with first, before moving to consider the detail of each of the claims (including the 9 individually numbered claims identified in the FCAS). These are grouped broadly as(a) issues of construction of the indemnity provisions, as well as related points such as dealing with recoveries already made in the earlier judgments, and(b) factual issues relating to the reasons for the length of time that it took for the Aircraft to be exported from Vietnam.[76]I will deal with those general points first, starting with the issues of construction.

The contractual scheme, construction of the indemnity provisions and related matters

[77]VietJet sought to argue that the award of the sums to FWA in the order of Picken J made on the handing down of Judgment 2, dated 17 April 2025, had the result that the claims for further sums that FWA sought to bring in trial 3 (apart from a claim under clause 20.4) were not open to them.[78]The central way in which this was put was the submission that there was a clear contractual scheme to deal with the remedies available to the Sub-Lessor upon the occurrence of an Event of Default and as to the consequences that followed if the Sub-Lessor opted to serve a Termination Notice. It was contended that clauses 19 and 20 provided a comprehensive, and exclusive, set of remedies available to the Sub-Lessor in the event it decided to terminate the leasing of the Aircraft following an Event of Default, and that the Sub-Lessor was not entitled to claim additional damages, alleged losses, or other remedies, upon termination.[79]This first requires considering what remedies the contractual scheme provides for and what has already been awarded to FWA as a result of Judgment 2. The amounts provided for in the case of termination following an Event of Default included, first, the payment of sums under clause 19.3 which include (among other possible sums): i) For the NEO Aircraft, the “A Line Termination Value”, which comprised two components: the “Basic Termination Amount” and the “A Termination Amount”. ii) For the CEO Aircraft, the “Termination Value”, which comprised the “Termination Value A” and the “Termination Value B”. Both the “A Termination Amount” (for the NEO Aircraft) and the “Termination Value B” (for the CEO Aircraft) were Excluded Property. FWA had the right to recover the former (because it had acquired the Excluded Property in respect of the NEO Aircraft) but not the latter (because it had not done so for the CEO Aircraft).[80]These sums had been carefully calculated in advance, for the purposes of the contractual documentation, in order to reflect the following: i) The Basic Termination Amount (NEOs) and the Termination Value A (CEOs) were equal to the Rental due for each Aircraft from the termination date to the end of the lease period. ii) The A Termination Amount (NEOs) and the Termination Value B (CEOs) were calculated to compensate the Japanese equity investors for the early termination of the leasing arrangement.[81]As to the latter, as Picken J explained at paragraphs 80 and 92 to 93 of Judgment 2, this termination sum included a sum compensating the Japanese equity investors for the reduced tax benefit as well as a sum to reflect the expected return on the equity investment for the investors. As he put it at paragraph 92: “The A Termination Amount/Termination Value B compensates the Japanese (equity) investors for equity finance provided by them (via the Lessors) to fund the purchase of the Aircraft, in addition to their bargained-for return, discounted for early receipt but adjusted to reflect the loss of the tax advantages which they would have received but for early termination.” (As I have already noted, in Judgment 2, Picken J rejected VietJet’s contention that these sums were irrecoverable as penalties.)[82]Sums were also awarded in respect of the NEO Aircraft under clause 20.4(c), being a sum equivalent to 150% of the Rental payable for the period of time between the termination date and the redelivery date. As Picken J explained in Judgment 2 at paragraphs 159-160, this was a sum payable by way of liquidated damages that:
“…compensates for VietJet holding over effectively following termination of the leasing, so incentivising VietJet to return the Aircraft in accordance with the terms of the Sub-Leases as promptly as possible.”
[83]It must also be taken into account in looking at the complete picture that, following the termination, if the Sub-Lessee did not exercise its option to take title to the Aircraft (on payment of the “Termination Price” pursuant to clause 19.3) – which was the set of circumstances that occurred here – the Sub-Lessor was entitled to return of the Aircraft in the Return Condition. In his submissions, Mr Thompson described that as having to return it in “pristine” condition.[84]So, in the set of circumstances that arose here, in respect of the NEO Aircraft (such as to put to one side, for the moment, the point about Excluded Property not being available to FWA for the CEO Aircraft), the Sub-Lessor is, as has been determined or is agreed, entitled to: i) Payment (through the termination sums) of sums reflecting the outstanding balance of the loan agreements to expiry, as well as payment of sums compensating the Japanese equity investors. ii) The return of the aircraft, which has to be in the Return Condition (or with an indemnity for the cost of putting it in that condition). iii) Liquidated damages (at 150% Rental) for the period of time between the termination date and redelivery. iv) Other specific entitlements under clause 20, such as 90 days storage of the Aircraft at the Sub-Lessee’s expense under clause 20.7.[85]VietJet contends that FWA cannot bring additional claims upon termination for other amounts which do not relate to putting the Aircraft into the condition required by clauses 19.2(b) and 20. They say that it is inconceivable that the parties would have agreed that further or other sums might be claimed which are, in substance, compensation for the condition of the Aircraft upon redelivery (much less claims connected only with FWA’s ownership of the Aircraft after it had repossessed them).[86]This requires analysing, as a matter of construction of the sub-lease and in particular in light of the provisions under which recoveries have already been made, what was within the scope of the various provisions now relied upon by FWA as the basis for their present claims. There was no real difference between the parties in relation to the general principles to be applied when construing a contract. As is well-known, it was explained in Wood v Capita [2017] AC 1173 that:
“10. The court’s task is to ascertain the objective meaning of the language which the parties have chosen to express their agreement. It has long been accepted that this is not a literalist exercise focused solely on a parsing of the wording of the particular clause but that the court must consider the contract as a whole and, depending on the nature, formality and quality of drafting of the contract, give more or less weight to elements of the wider context in reaching its view as to that objective meaning. … 11. … Interpretation is, as Lord Clarke JSC stated in the Rainy Sky case (para 21), a unitary exercise; where there are rival meanings, the court can give weight to the implications of rival constructions by reaching a view as to which construction is more consistent with business common sense. But, in striking a balance between the indications given by the language and the implications of the competing constructions the court must consider the quality of drafting of the clause …; and it must also be alive to the possibility that one side may have agreed to something which with hindsight did not serve his interest … . Similarly, the court must not lose sight of the possibility that a provision may be a negotiated compromise or that the negotiators were not able to agree more precise terms. 12. This unitary exercise involves an iterative process by which each suggested interpretation is checked against the provisions of the contract and its commercial consequences are investigated…: 13. Textualism and contextualism are not conflicting paradigms in a battle for exclusive occupation of the field of contractual interpretation. Rather, the lawyer and the judge, when interpreting any contract, can use them as tools to ascertain the objective meaning of the language which the parties have chosen to express their agreement. The extent to which each tool will assist the court in its task will vary according to the circumstances of the particular agreement or agreements.”
[87]The parties also relied on what was said in relation to indemnity provisions by Staughton LJ in The Eurus [1998] 1 Lloyd’s Rep 351 at 360 col.2):
“The extent of a person’s liability under an indemnity depends on the nature and terms of the contract, and each case must be governed, in general, by its own facts and circumstances.”
[88]The fact that the sums identified at paragraph ‎84 above were payable under the sub-lease, and have been awarded to FWA, is not a necessary bar to other claims for other sums being made under the contract. As Lord Sumption explained in Bunge SA v Nidera BV [2015] UKSC 43; [2015] Bus LR 987 at paragraph 27:
“A damages clause, like any other contractual provision, is conclusive of the matters with which it deals. It may also implicitly exclude considerations which, although not directly within its scope, cannot be applied consistently with its terms. But it is a question of construction whether the mere fact that it deals with damages means that it must have been intended to do so exhaustively, thereby impliedly excluding any considerations which it has not expressly addressed. To treat a damages clause as a complete code in this all-embracing sense is to tax the foresight of the draftsman in a way which is rarely appropriate unless the alternative is to undermine the coherence or utility of the clause.”
Like other questions of construction, that requires a consideration of the whole of the contract in its context.[89]In relation to this point, VietJet relied upon what was said by Males LJ in K Line PTE v Priminds Shipping [2022] Bus LR 67, a case dealing with the scope of a demurrage clause in a charterparty, at paragraph 53:
“…while it is possible for contracting parties to agree that a liquidated damages clause should liquidate only some of the damages arising from a particular breach, that strikes us as an unusual and surprising agreement for commercial people to make which, if intended, ought to be clearly stated. Such an agreement forfeits many of the benefits of a liquidated damages clause which, in general, provides valuable certainty and avoids dispute.”
That underlines the importance of understanding the scope of the losses that a liquidated damages clause is intended to deal with. It is important to note that what Males LJ was there referring to were damages arising “from a particular breach”, rather than a situation where a right to damages arose from a separate breach.[90]Here, in assessing whether the intention of the parties was that clauses 19 and 20 provided an exclusive set of remedies available to the Sub-Lessor in the event it decided to terminate the leasing of the Aircraft following an Event of Default, one needs to have regard to the contract as a whole, and the scheme of the JOLCO arrangement. Relevantly: i) Various provisions of the sub-leases expressly contemplate that the Sub-Lessor could exercise multiple remedies, both cumulatively and in the alternative, including those under clause 23. The opening words of clause 19.1 include a statement that the steps open to the Sub-Lessor under that clause were “without prejudice to any other rights of the Sub-Lessor under this Agreement or the other Operative Documents or at law”. Clause 23.3 confirms that “each and every indemnity” contained in the sub-lease continued in full force and effect (in favour of each Indemnitee) notwithstanding the termination of the sub-leases, the lease period or the leasing. Clause 25.2 provides that:
“The rights, powers and remedies provided in this agreement and the other Operative Documents are cumulative and are in addition to, and not exclusive of, any rights, powers and remedies provided by law…” ii) Consistently, the final item (j) in the list of exclusions under clause 23.2 provides for an exception to the clause 23.1 indemnity for Losses “for which such Indemnitee has actually been indemnified (to the extent so actually indemnified) pursuant to any other provision of any Operative Document”
. That is, notably, not an exception for any Loss covered under another indemnity provision, but rather ensures an Indemnitee cannot recover twice – its focus on actual recovery is premised on the Loss being recoverable under more than one provision. iii) Clause 23.1 goes beyond, and was obviously intended to go beyond, what was dealt with by the provisions of clauses 19-20 in respect of the parties to be indemnified. For example, clause 20.4 is only available to the Sub-Lessor, not to the other Indemnitees who are expressly identified under clause 23.1. Clause 23.1 is clearly intended to give a right to an indemnity to the Indemnitees other than the Sub-Lessor – there is no clear reason why that right should be lost just because the clause 19-20 regime is in place in favour of the Sub-Lessor. iv) Clause 23.1 was also clearly intended to be wide in respect of its temporal scope. It expressly covered Losses arising “regardless of when the same shall arise (whether prior to, during, or after termination of, the Lease Period)…”. See also clause 23.3 specifically dealing with the continuation of the indemnities. v) Whilst there may be some overlap between the various indemnities, that is not particularly surprising in the circumstances and context of the sub-leases within the JOLCO structure. It was anticipated that the Sub-Lessee would keep the Aircraft and the Sub-Lessor / Lessor would not take redelivery of the Aircraft but that, if it did, in broad terms it should be protected from any costs or losses of having done so (at least until the Sub-Lessee had fulfilled all of its obligations under the sub-lease). In those circumstances, where there is a clear intention to ensure that losses accruing to the Sub-Lessor, or other Indemnitees, were covered, the prospect of overlapping indemnities and/or a single scenario being covered by two indemnities is explicable. It is entirely plausible to contemplate a “belt and braces” approach in such circumstances.[91]In support of its position, VietJet contended that losses which were covered more particularly by express and specific provision in the sub-lease could not be recovered under the general indemnity found in clause 23.1, relying upon the proposition set out at paragraph 7.46 of Lewison on the Interpretation of Contracts (8th ed.), described as a loose rendering of the maxim Generalia non specialibus derogant, that:
“Where a contract contains general provisions and specific provisions, the specific provisions will be given greater weight than the general provisions where the facts to which the contract is to be applied fall within the scope of the specific provisions.”
VietJet relied on this passage in Lewison having been cited with approval by the Court of Appeal in Steve Ward Services (UK) v Davies & Davies Associates [2022] EWCA Civ 153, Coulson LJ at paragraph 16.[92]FWA, in turn, pointed out that the principle generally applies where there is an inconsistency between the two provisions (one general, one specific) of the contract, relying on what is said in Lewison at paragraph 7.50 and its citation of the decision of David Steel J in The Eternity [2009] 1 Lloyd’s Rep 107:
“Whilst it is correct that in the face of a conflict between provisions the more specific and tailored provision should prevail, such only arises if the conflict is clear and direct.”
Similarly, in Steve Ward Services, Coulson LJ introduced the point at paragraph 16 by asking what the position was if the specific provision “differed from or contradicted” the general provision.[93]Here, VietJet did not rely on an inconsistency between two provisions, but rather suggested that where the Sub-Lessor was entitled to a remedy under one provision, the existence of that remedy excluded recovery under another more general provision of the sub-lease. However, as I have already set out, in the context of this contract and the circumstances of the JOLCO arrangement, there is nothing objectionable in having more than one clause respond to the same loss. Moreover, the terms of the sub-lease themselves suggest that recovery under more than one indemnity provision is contemplated. See for example clauses 23.2(j) and 25.2, as already noted.[94]As a matter of construction of the sub-lease, therefore, the fact that remedies are provided to the Sub-Lessor in clauses 19-20 in the event it decided to terminate the leasing of the Aircraft following an Event of Default does not mean that those are the exclusive set of remedies available to the Sub-Lessor in such circumstances. The existence of those remedies does not exclude the application of other remedies, including the clause 23.1 indemnity, in particular where it covers other losses.[95]However, where the clause 19-20 regime calculates an amount to deal with a particular loss to the Sub-Lessor, by way of liquidated damages, that fixes what is recoverable for that particular loss. See generally McGregor on Damages (22nd ed) at paragraph 17-027. The Termination Values, for example, incorporated an amount to compensate the equity investors for their loss of tax benefits, and it cannot have been contemplated that the Sub-Lessor would be able to sue for some additional amount that it said it had suffered by way of loss of tax benefit under another clause of the sub-lease or at common law. Similarly, clause 20.4(c) dealt with the rate at which “Rental” would be paid for the period between the date of termination of the leasing and the date of redelivery – it fixed that rate by way of liquidated damages, and the Sub-Lessor could not seek to make a further claim for a higher rent for the same period under another provision of the sub-lease.[96]In other words, two different points have to be distinguished. On the one hand, where clauses 19-20 fix a particular amount for payment to deal with a specific head of loss arising in a particular set of circumstances (e.g. by way of liquidated damages), that is the remedy provided for by the sub-lease for that loss in those circumstances, and the Sub-Lessor is not able to seek further amounts by way of an indemnity or damages under other provisions of the sub-lease. On the other hand, clauses 19-20 did not provide an exclusive code of all remedies available to the Sub-Lessor in circumstances relating to the declaration of an Event of Default and/or termination. The parties did not, by agreeing clauses 19-20, agree that losses not specifically dealt with under those clauses could not be recovered by the Sub-Lessor (still less by other Indemnitees) at all under another provision of the sub-lease.[97]As a result, VietJet’s general submission that the existence of clauses 19-20 excludes FWA’s ability to bring any of its claims under other provisions of the sub-leases in this third trial is not correct. However, in respect of certain claims, as noted further below, it is right to say that FWA cannot resort to other indemnity provisions to avoid the specific provision made in clauses 19-20 for a particular head of loss, e.g. for loss of use of the aircraft in the period between date of termination and redelivery, where the remedy and sum for that head of loss is fixed under clause 20.4(c).[98]The above conclusions are reinforced by the existence of the concept of the Excluded Property in the sub-leases. It was acknowledged by FWA that, because in respect of the CEOs it had not obtained an assignment of the Excluded Property, it could not bring claims relating to the CEOs under clauses 10.2, 20 and 23.7. However, the fact that the concept of the Excluded Property was always part of the sub-leases, and the JOLCO scheme generally, must be borne in mind when considering what the parties intended by way of the scope of coverage of all of its provisions. The purpose of the existence of the Excluded Property was to ensure that the security provided to the financing parties did not encompass all of the Sub-Lessor’s rights under the sub-lease. The Sub-Lessor retained certain of the rights to exercise in its own right and for its own benefit. The parties did not envisage the financing parties being able potentially to undermine, through a claim under another provision, the ability of the Sub-Lessor to recover under a provision that fell within the scope of the Excluded Property. Thus, where the sub-lease provides a particular remedy and calculation of the sum payable by way of liquidated damages (at 150% Rental) for the period between date of termination and date of redelivery, and that remedy is part of the Excluded Property, it is difficult to see how the parties could have envisaged a claim being brought for payment of lost rental for the same period under a different provision of the sub-lease (which may not have been Excluded Property). The right to a payment representing loss of use of the Aircraft in that period of time was excluded from the rights that were assigned as part of the security to the financing parties. However, there is nothing in the concept or existence of the Excluded Property which suggests that rights arising under provisions of the sub-leases which do not constitute Excluded Property (and which were therefore anticipated would be available to the financing parties as part of their security) would be curtailed insofar as they were protecting other interests (including the financing parties’ own interests) and other heads of loss, or indeed other periods of time.[99]That is not, however, the entire picture in relation to claims under the indemnities. In relation to the claims in respect of the CEO Aircraft, it must be carefully borne in mind how FWA is able to bring its claims and in what capacity it does so. In respect of the CEO contracts, the rights under clause 23.1 were Excluded Property (which FWA does not have) insofar as they were rights of a “Relevant Person”, which included the Lessor but excluded the Financing Parties. In other words, the rights of a Financing Party, or its successor or affiliate, to an indemnity for its loss are held by FWA, such that in that capacity FWA is an Indemnitee under clause 23.1 and, even though a third party to the sub-lease, can enforce its right to an indemnity as a result of clause 26.3 of the sub-lease (dealing with third party rights). The result is that FWA can bring claims under clause 23.1, but only in respect of loss it has suffered as a successor or affiliate of a Financing Party. It cannot claim loss it has suffered, not because it is a successor or affiliate of a Financing Party, but because, for example, it subsequently assumed ownership of the Aircraft.[100]To analyse how this affects FWA’s ability to bring its claims in relation to the CEO Aircraft under clause 23.1 requires a recap of the manner in which FWA obtained the rights it seeks to exercise: i) In late 2021, FWC bought the loans and took over as Security Trustee. It thereby acquired the rights of the Financing Parties, including the rights that had been assigned to them pursuant to the Security Assignments, as well as rights as mortgagees of the Aircraft. ii) FWC then sold certain of its rights as Security Trustee to FWA, by way of the Claims Assignment Agreements dated 8 and 9 November 2021. This did not include what was defined as the “Aircraft Excluded Property,” which in broad terms constituted the Aircraft itself, any bill of sale relating to it, and the Termination Amounts under the sub-lease but only in the event that the Sub-Lessee exercised its option to purchase the Aircraft. (There was some dispute as to precisely what rights fell within the Aircraft Excluded Property, including whether they included the rights to repossess the Aircraft under clause 19 of the sub-leases, which I deal with further below in the context of the claims for conversion). iii) In January 2022, FWC exercised its remaining rights under the mortgages to sell the Aircraft to SPV companies. Those buyers purchased in their own right, albeit later on they came to be referred to as the “Trustee Owners”. The sale agreements did not purport to pass to the new owners (nor could they) the rights(i) that had been assigned by FWC to FWA on 8-9 November 2021, or(ii) the Excluded Property, which FWC had not acquired. I was told that the sale price was the same as the value of the outstanding debt which FWC had bought from the lenders. iv) In August 2022, shortly before the claim form in these proceedings was issued, the new owners of the Aircraft made declarations that they held the Aircraft on trust for FWA. This was the point at which FWA acquired an interest in the Aircraft themselves.[101]FWA, therefore, ended up with(a) the Aircraft (as a beneficial owner under the declarations of trust) and(b) some of the rights of the Sub-Lessor under the sub-leases, but not (in relation to the CEOs) the Excluded Property. In relation to the CEO Aircraft, FWA’s rights under clause 23.1 are those of a successor of a Financing Party, or (as FWA emphasised in their closing submissions) an affiliate of a successor of a Financing Party (i.e. an affiliate of FWC), and on the basis of the terms of the sub-lease – in clause 23.1 and clause 26.6 – it is able to enforce those rights directly against VietJet. However, it is rights as a successor/affiliate of a Financing Party which it is able to enforce, not those of the Sub-Lessor or any successor to the Sub-Lessor in terms of ownership of the Aircraft. FWA came to own the Aircraft in the manner set out above, but it did not thereby acquire any further contractual rights against VietJet, nor can the fact that it did so improve its position in terms of a contractual claim against VietJet under the clause 23.1 indemnity.[102]The various claims relating to the maintenance work, management, parking etc of the Aircraft whilst they were in Vietnam that were incurred by or on behalf of FWA were incurred by (or on behalf of) FWA not because it was a successor/affiliate of a Financing Party, but because it (or an affiliate) was the owner of the Aircraft. No doubt a Financing Party, before it realises its security in the Aircraft, has an interest in the Aircraft being put into Airworthy condition, maintained, stored appropriately etc, in order to maintain the value in the security that the Financing Party holds in that Aircraft and it may well incur expense in protecting its security in that sense. Such costs would fall within and could potentially be recovered by the Financing Party under clause 23.1. However, here, the Aircraft had been sold, in realisation of the security interest in the Aircraft in January 2022 (before the Aircraft were redelivered) such that the security interest in the Aircraft had been discharged. The Security Trustee had sold the Aircraft pursuant to the mortgage that it held, with the result that as a Financing Party it, or its successors and affiliates, had no further interest in the Aircraft’s condition, or its ability to fly out of Vietnam, etc. No doubt the new owners, who had purchased on an “as is, where is” basis from FWC would have an interest in the Aircraft’s condition, but they were not Financing Parties and derived no rights under clause 23.1 from their purchase of the Aircraft.[103]This is not affected by the fact that, as FWA emphasised, the rights under the Security Assignments are (under their terms) only discharged upon payment (and not just where judgment is entered), such that its rights as assignee of the security interests have not been extinguished by the judgments in this litigation to date (which largely remain unpaid). It still has those rights to exercise. However, in respect of the CEO Aircraft, they do not avail FWA in relation to all of their claims under clause 23.1.[104]FWA’s outlay on the CEO Aircraft whilst they were in Vietnam was not incurred in order to preserve or maintain a security interest in the Aircraft, because such interests no longer existed. Those costs were not, therefore, incurred as a Financing Party, or as successor or affiliate of a Financing Party, but because the ownership of the Aircraft remained within the FitzWalter Group and, in particular, with the Trustee Owners on behalf (by the time the Aircraft were redelivered) of FWA. FWA’s rights under clause 23.1 do not include a right to an indemnity as Sub-Lessor, or as owner of the Aircraft, but only as affiliate or successor of a Financing Party. The Trustee Owners chose to acquire the Aircraft on an “as is, where is” basis, and then declared they held them on behalf of FWA, and FWA then sought to improve their condition and then sell or lease the Aircraft. But those were not steps taken as Financing Parties, or as successors or affiliates of Financing Parties.[105]The fact that the security granted to the Financing Parties was not confined to the Aircraft mortgages, but also extended to a suite of contractual rights including the rights to certain of the Termination Amounts and indemnities, does not change this. FWA did inherit certain of the rights of the Security Trustee, and has enforced them in this litigation, as it has been entitled to do, but that is enforcement of its contractual rights e.g. to the Termination Amounts, and it does not relate to its maintenance or repair of the Aircraft in Vietnam or the steps it took to export the Aircraft from Vietnam.[106]Accordingly, FWA’s claims in these respects in relation to the CEO Aircraft do not fall under clause 23.1.[107]For a similar reason, FWA’s claim for lost rental income in respect of the CEO Aircraft post redelivery is not one it can bring, as an affiliate or successor of a Financing Party, under clause 23.1. By the time it took redelivery of the Aircraft, the interest of the Financing Parties (and their successors and affiliates) in the Aircraft had ceased. As to any claim for rental pre-redelivery, that is the claim dealt with under clause 20.4(c) which, as I have noted, was Excluded Property and, as I have already explained (and to which I return below), a claim to lost rental for the same period is not also available under clause 23.1.[108]FWA’s claim for enforcement costs is slightly different. A claim under clause 10.2 is Excluded Property, and is not pursued by FWA in relation to the CEO Aircraft, but a claim under clause 23.1 is potentially open to it insofar as costs were incurred in preservation or enforcement of FWA’s rights as affiliate or successor of a Financing Party. In other words, in broad terms, where those costs were incurred in preservation or enforcement of its contractual rights, e.g. to the Termination Sums which formed part of the security, such costs might fall within clause 23.1. However, where those costs were incurred in relation to maintaining, preserving or enhancing the condition of or value in the CEO Aircraft (for example, in court proceedings in Vietnam in relation to the export of the Aircraft), they would not. Like the claims in relation to maintaining the CEO Aircraft, they were costs associated with FWA’s ownership interest in the Aircraft, not with its inheritance of the rights of the Financing Parties. I will deal with the detail of the claims for enforcement costs separately.[109]FWA does not encounter the same problem in relation to the NEO Aircraft, where it has acquired the Excluded Property. It was the owner of the NEO Aircraft, through a similar route to its ownership of the CEO Aircraft, but it also acquired the Excluded Property rights in relation to the NEO Aircraft from the original Lessors under the Participation and Sale Agreement. It was, therefore, within the terms of clause 23.1, a successor or permitted assign of the Lessor and able to bring its claims under that indemnity as such. And, as already identified above, clause23.1 was expressly drafted to include Losses arising “prior to, during, or after termination of, the Lease Period”, and clause23.2 specifically dealt with the continuation of the indemnities.[110]VietJet also, and relatedly, contends that as a result of what FWA has already been awarded, it is precluded from bringing claims under the indemnity clauses 23 to 25.11 because it can point to no “Loss” which it has suffered.[111]However, this in itself is not an answer to the claims. The sums awarded by Picken J dealt with different matters to the claims now made. The losses pursued in this trial are based on FWA’s repair, operation and maintenance of the Aircraft, including the cost of returning the Aircraft to airworthiness and exporting them from Vietnam, as well as the lost opportunity to lease the Aircraft following their redelivery. The interests protected by the sums previously awarded were different, with the exception of the amount awarded in respect of the NEOs for “Rental” at 150% between the termination date and the redelivery date.[112]VietJet relied upon Picken J’s statement in Judgment 2 (at paragraph 31) that “payment of the Termination Values (together with rent and other outstanding sums at the date of termination) would fully compensate the Sub-Lessor (and Lessor) for all and any loss that might be suffered on termination of the Leases.” However, that needs to be placed in context. It was a reflection of FWA’s submission that the termination sums reflected “(i) the liabilities the Lessor had assumed to the lenders) and (ii) the expected distribution for equity that the Japanese investors had under the transaction at the date that it falls due” (as Picken J quoted from FWA’s Reply at the end of that same paragraph of Judgment 2). It was anticipating and dealing with a situation where the Aircraft had been redelivered on time and in an appropriate condition. There was no suggestion that additional costs associated with the Aircraft being in an unairworthy state, or redelivered late, were factored into the calculation of the Termination Values.[113]A similar point was also made by VietJet to the effect that if and insofar as more than one contractual remedy had been available to FWA in respect of the same head of loss, it cannot now pursue a claim for that head of loss if it has already been awarded it following Judgment 2. The argument was that a claim which might be made on two or more bases would merge into a successful judgment for relief based on any of those bases. This was not developed by reference to any authority and the claims pursued at trial 3 were for different losses compared to those for which sums were awarded in Judgment 2, such that it appeared the principle did not apply. In any event, by the time of the oral closing submissions, Mr Thompson recognised that there was not “anything left on which the principle [of merger] now bites.” The parties did not address this any further and, in the circumstances, there is no need for me to deal with it to any further extent. Clause 23.1 – is it limited to third party claims?[114]VietJet contends that, on its true and proper construction, clause 23.1 is limited to an indemnity against claims brought by third parties against the Indemnitee, and does not extend to an indemnity in respect of direct costs “voluntarily incurred” by the Sub-Lessor. It said that the purpose of the clause was to insulate the Sub-Lessor, and anyone connected to it, from claims that might arise by virtue of anything to do with the Aircraft or its use whilst under the Sub-Lessee’s control. VietJet contended that its construction accords with the express language of clause 23.1, renders most coherent the broader contractual scheme of the sub-lease, and was the construction most consistent with business common sense whereas it said FWA’s construction would produce a result of such unfairness that it would require particularly clear words, which were not present. FWA contended that was not correct, that the indemnity in clause 23.1 was not limited in that way, and that VietJet’s proposed construction was inconsistent with the language of clause 23.1 and was wrong as a matter of analysis and construction.[115]I have set out above the key parts of clause 23.1. On its face, the language of clause 23.1 is not limited to an indemnity against third party liabilities. It contains a promise to indemnify and hold harmless the Indemnitees “from and against all and any Losses of whatsoever kind and nature …which may from time to time or at any time be imposed on, suffered or incurred by or asserted against any Indemnitee…”. The definition of Losses was as follows:
“"Losses" means costs, losses, charges, expenses (including reasonably incurred legal expenses), liabilities, fines, fees, obligations, settlements, demands, claims, actions, suits, penalties, payments, damages, adverse judgments or orders or other sanctions and "Loss" shall be construed accordingly.”
[116]Some of that language, both in clause 23.1 and in the definition of “Losses” is obviously that of third party claims – many of the words identifying “Losses” are apposite to describe third party claims, and the words “imposed on” and “asserted against” (particularly the latter) are apt for a situation where a third party claim is being made. However, other words in the definition of “Losses”, particularly “losses” itself, refer to something wider than a third party liability. And whilst such a liability could be “suffered or incurred” by an Indemnitee, so could a first party loss or cost.[117]VietJet places weight on the second half of clause 23.1 in construing the scope of the clause. The first half sets out the indemnity, including the five sub-paragraphs (a) to (e) which list the matters which the Losses must be “relating to, arising out of or resulting from (whether directly or indirectly).” The second half starts with the words “If a claim is made against an Indemnitee … which is likely to result in Losses …” and goes on to provide a regime by which the Indemnitee is to consult with the Sub-Lessee to consider what action (if any) may be taken to contest such a claim, and then a series of provisions detailing how any action taken as a result affects the indemnity. That was relied upon by VietJet to suggest that the entire clause was all about an indemnity against third party liabilities. However, that is to read too much into the presence of the second half of clause 23.1. It is there to provide a regime for the handling of a claim if it is a claim that is likely to lead to an indemnifiable Loss. It does not say, or suggest, that it is only a third party claim that can lead to an indemnifiable Loss.[118]VietJet placed particular weight in its argument on the decision of Tomlinson J in Pindell Ltd v AirAsia Bhd [2010] EWHC 2516 (Comm); [2012] 2 CLC 1. That case concerned an operating lease of an aircraft which the lessee redelivered to the lessor later than had been agreed. The owner of the aircraft had entered into a contact to sell the aircraft at a very good price negotiated at the top of the market, and the late redelivery resulted in the loss of that sale contract. The lessor claimed against the lessee damages or an indemnity for loss of that sale. Tomlinson J dismissed the claim for damages at common law and, in then considering the claim under the two contractual indemnities there in issue, said it was precluded by his conclusion that the loss in respect of which the indemnity was sought was caused by “extremely volatile market conditions” (paragraph 91). He went on to consider obiter the claim under the indemnities more generally.[119]The part of Tomlinson J’s reasoning relied upon by VietJet is at paragraph 95 of the judgment, where the judge addressed clause 19.1 of the lease before him, finding that its “scope is limited to third party claims against the relevant Indemnitee.” He held that the language and content of the provisions in question showed that clause 19.1 did not contemplate an indemnity in respect of the claimants’ own financial loss, but rather connoted a third party making a claim against the lessor or owner consequent on the lessee’s operation of the aircraft. VietJet noted that clause 19.1 in Pindell contained conditions consistent with standard claims handling (as Tomlinson J described them at paragraph 95), in a similar way as the second half of clause 23.1 did in the sub-lease here, which was one of the matters relied upon by Tomlinson J in his conclusion on construction.[120]It is axiomatic that each contract is to be construed by reference to its own language and in its own context. However, it is right to note in relation to clause 23.1 that there are some similarities with the clause in Pindell, including in some of the wording of the clause. That case is not, however, on all fours with the present one. That was a case of an operating lease, in the context of which Tomlinson J remarked (at paragraph 78) that it would “be surprising if this loss is in principle recoverable under a standard form aircraft operating lease, particularly one in respect of an aircraft which on redelivery was over 20 years old”. The context here is different – the lease and sub-lease are part of the JOLCO structure which, as explained in Judgments 1 and 2, was set up with the anticipation that the Lessor would not end up with the Aircraft. The position of the parties in this structure is entirely consistent with the Lessor being protected from having to incur any costs or suffer any loss in respect of the Aircraft.[121]Moreover, clause 19.1 in the Pindell case was expressly worded to refer to indemnification from a list of matters which it identified and defined as a “Claim” (the equivalent in clause 23.1 here being “Losses”). Although the list of matters in Pindell comprising a “Claim” included “losses”, the context of the list itself and the definitional term there used (“Claim”) is one of third party liability. The notification provision in Pindell applied to anything covered under the indemnification clause (requiring notification of “any Claim as to which indemnification is sought”), and the claims handling provisions equally applied to everything caught by the clause. The use of the term “Claim” throughout that part of clause 19.1 in Pindell made it clear that what was contemplated as being indemnified was a third party liability. However, the second half of clause 23.1 in the sub-lease here works differently, because it is triggered by a claim “which is likely to result in Losses”, and then goes on to focus on such a claim and action taken in relation to the claim, rather than using the term “Losses” as an equivalent to “claim”.[122]Due to the differences in the wording in the clause in Pindell, and the context, it cannot dictate the outcome of the construction argument in this case.[123]Not only do the opening words of clause 23.1 encompass first party losses and costs, but there is nothing in the remainder of the first half of clause 23.1 to suggest that the indemnity is limited to third party claims. In fact, some of the inclusions seem much more likely to have first party losses in mind, rather than third party claims (for example, clause 23.1(c), (d) and (e)). Similarly, it is difficult to see why the exception under 23.2(e) (excluding from the indemnity Losses “constituting the ordinary and usual operating and overhead expenses of such Indemnitee”) would have been required if the indemnity only ever covered third party liabilities.[124]Moreover, the fact that a number of those identified as benefiting from the indemnity under clause 23.1 would be likely only to suffer loss as a result of a third party claim (e.g. officers, directors and employees) does not mean that it was not intended that the indemnity would cover only third party claims, where others of those identified might suffer or incur “Losses” more broadly.[125]VietJet notes that clause 23.1 is drafted in expansive terms, in terms of the circumstances giving rise to the indemnity and the wide class of persons to be indemnified. VietJet also said that the breadth of the clause was consistent with an intention to allocate risk which, in turn, was most naturally consistent with a desire for protection against claims by third parties. I do not accept that. Whilst protection against third party claims is no doubt an important part of risk allocation, there is no reason why first party costs which one of the parties to the contract incurs might not equally be part of risk allocation. In other words, saying it is about risk allocation does not advance the argument either way.[126]In his oral closing submissions, Mr Thompson put his emphasis on the words “imposed on, suffered or incurred by or asserted against …” as demonstrating that the Loss could not include direct costs voluntarily incurred. However, even if Mr Thomspon was right that those words might connote the sense of losses or costs being incurred other than “voluntarily” that does not itself mean that they can only arise by reason of a third party claim. For example, costs incurred in making an unairworthy aircraft ready to fly would need to be spent by any owner which wanted to make commercial use of the asset – such costs would not be “voluntarily” incurred in any relevant sense in the context of this agreement. These words in the clause do not require the limitation to third party claims that VietJet seeks.[127]In terms of its place in the broader contractual scheme, VietJet points to the contractual remedies available to the Sub-Lessor under clauses 19 and 20, suggesting they are so generous and comprehensive that it is not obvious why the Sub-Lessor would need or could legitimately expect additional protection under clause 23.1. It points out in particular the right to receive the Aircraft back in “pristine” condition, liquidated damages for any period of time the Sub-Lessee keeps the aircraft after termination, and the various other specific indemnities for costs spent or incurred in connection with redelivery (e.g. clause 20.3 dealing with inspection, and clause 20.7 dealing with storage). It is right that the contractual provisions other than clause 23.1 give protection in a variety of circumstances to the Sub-Lessor, and one might ask why an additional general protection was required. The answer is provided by the context of the sub-lease within the JOLCO structure, and the fact that it was anticipated that the Sub-Lessee would keep the Aircraft and that the Lessor would not take redelivery of the Aircraft but that, if it did, in broad terms it should be protected from any costs or losses of having done so (at least until the Sub-Lessee has fulfilled all of its obligations under the sub-lease).[128]In any event, clause 23.1 goes beyond, and was obviously intended to go beyond, what was dealt with by those other provisions in respect of the parties to be indemnified. The provisions noted by VietJet as already providing generous contractual remedies (e.g. clauses 20.4 and 20.7) are only available to the Sub-Lessor, not to the other Indemnitees who are expressly identified under clause 23.1. It is difficult therefore to see how the scope of clause 23.1 (which must be the same in respect of each of the Indemnitees, including the Sub-Lessor) should be dictated by the presence of other provisions which benefit only the Sub-Lessor.[129]Moreover, clause 23.1 did not operate only on redelivery (although the incidence of first party costs being incurred by the Lessor is most likely to be felt in a redelivery scenario), but was a general indemnity intended to keep the Sub-Lessor (and ultimately the Lessor) insulated from costs or losses relating to its ownership etc of the Aircraft. The JOLCO structure was put in place with the purpose and anticipation of being an efficient and economic way for VietJet to (ultimately) purchase the Aircraft, with the funds being provided through the combination of the lenders and the equity participants. As was made clear in Judgments 1 and 2, the equity participants in particular had no interest in, or expectation of, ending up with the Aircraft – that was not part of their purpose in entering into these arrangements in the first place – and it is entirely understandable why the contracts would include wide indemnities (even if overlapping to ensure full coverage) seeking to insulate them from costs should they end up with them.[130]VietJet said that if clause 23.1 includes first party losses, it renders a number of the other specific indemnities, which are drawn more narrowly than clause 23.1, otiose. Something VietJet suggests is unlikely to have been contemplated by the drafter. However, as I have already indicated, where it was clearly intended by the context that the Lessor should not end up with the Aircraft (or, if it did, should not end up with the costs associated with having the Aircraft, at least up to the point when the Sub-Lessee had fulfilled all of its obligations under the sub-lease), such that the drafter can be expected to have sought to ensure the various indemnities covered all possibly arising scenarios, it is less likely that the drafter would have intended that there would be no overlapping of indemnities or that the same scenario might not end up being covered twice. As I have already noted, it is entirely plausible to contemplate a “belt and braces” approach in such circumstances. This is consistent with the final item (j) in the list of exclusions under clause 23.2, which provides for an exception to the clause 23.1 indemnity for Losses “for which such Indemnitee has actually been indemnified (to the extent so actually indemnified) pursuant to any other provision of any Operative Document” and which, as I have noted above, is not an exception for any Loss covered under another indemnity provision, but rather ensures an Indemnitee cannot recover twice – its focus on actual recovery is premised on the Loss being recoverable under more than one provision.[131]For a similar reason, VietJet’s contention that, as a matter of business common sense, FWA’s construction would throw the sub-lease out of commercial balance, is not correct. The commercial balance in the sub-lease is not one of two parties in the business of owning and/or operating aircraft, where it is always understood and intended that the lessor will bear the ordinary costs of owning an aircraft, and where there is a division or allocation of risk to each of the parties in respect of various scenarios. It is, and was always, one between an airline, which all parties intended to operate the aircraft as its own and anticipated would ultimately own the aircraft, and parties involved in the arrangement for the purposes of providing finance (and, for the equity investors, for reasons connected to tax). The Sub-Lessor under the sub-lease was never intended to bear the cost of owning the Aircraft (at least until such time as the Sub-Lessee had fulfilled all of its obligations under the sub-lease) such that it makes entire commercial sense that the terms of the sub-lease made it good against costs that it did incur in that respect, including if it did take redelivery.[132]VietJet also contends that a construction of clause 23.1 that includes first party losses renders the default indemnity in clause 23.7 pointless, saying there would be no scenario where an indemnity would be available under clause 23.7 but not 23.1. FWA did not accept that, pointing out (correctly) that clause 23.7 could be triggered by a breach of this sub-lease or any other Operative Document (the definition of which comprised a long list of documents connected to the lease of the Aircraft and the funding), not all of which would necessarily be caught under clause 23.1. However, even putting that to one side, VietJet’s argument that clause 23.7 would be rendered pointless assumes that the default indemnity in clause 23.7 covers first party losses as well as third party liabilities. Yet the words used to describe the scope of the two indemnity clauses are materially similar. They both cover “any and all Losses of whatsoever kind or nature” In fact, clause 23.1 says “all and any Losses …” whereas clause 23.7 says “any and all Losses…” but that cannot make any difference. which may at any time be “imposed on, suffered or incurred by or asserted against” the Sub-Lessor (clause 23.7) or the Indemnitee (clause 23.1). It is highly unlikely that the drafter intended, using the same forms of words in these sub-clauses of clause 23, that one would be limited to third party claims and the other not so limited. They obviously were intended to have the same scope in that respect. The result is that if, on FWA’s construction, clause 23.7 is pointless (as VietJet argues), it would be just as pointless on VietJet’s construction of those words. This does not therefore assist.[133]VietJet also points to what it said would be the absurd position that, in the case of a default where losses are caused by the Sub-Lessor’s own fraud, an indemnity would be available under clause 23.1. This point does not help VietJet. First, if it were correct, it would also mean – on VietJet’s construction – that the indemnity was available where the Sub-Lessor’s liability to a third party was caused by the Sub-Lessor’s own fraud. In other words, this point does not assist in working out what the scope of the indemnified “Losses” should be. But, second, and in any event, it posits an unrealistic scenario. The argument relies upon the fact that one of the Exceptions under clause 23.2 is where the Losses arise solely as a result of the fraud of the Indemnitee, but that the Exceptions (it is argued) are disapplied in the case of a breach, such that the indemnity would still apply to the benefit of the Sub-Lessor, even if it had been fraudulent, in a situation where the Sub-Lessee was in breach. However, the disapplication of the Exceptions is slightly more nuanced than that. Under the opening words of clause 23.2, the Exceptions are not disapplied simply where a breach Using “breach” as VietJet did in this argument, as a shorthand for a “Potential Event or an Excepted Reason”. has taken place, but only where the exclusion (i.e. in this example, the Sub-Lessor’s fraud) arises The full wording is “arises or is imposed on, suffered or incurred by or asserted against such Indemnitee as a result of” the breach, but “arises” is the only part that makes sense in the context of the Indemnitee’s own fraud. as a result of the breach. It is difficult to conceive of a situation where the Sub-Lessee’s breach (the consequences of which are being indemnified) causes the Sub-Lessor’s fraud, such that it is unrealistic to think that the exception would be disapplied at all in a case of Sub-Lessor fraud.[134]Accordingly, the express language of clause 23.1 is contrary to VietJet’s contention, and that contention does not render the broader contractual scheme most coherent, as VietJet argued. Rather FWA’s construction is entirely consistent with that scheme and with the commercial context of the JOLCO arrangement. The FWA construction does not produce a result of “such unfairness that it would require particular clear words” (as VietJet argued) – on the contrary, the result is consistent with the purpose of the JOLCO arrangement and fair between the parties in the context of that arrangement, and certainly not so unfair that some clearer wording is required than was in fact included in the clause. Clause 23.1 is not limited to indemnification against third party claims. Clause 23.1 – what causal link is required?[135]VietJet contended that the language of clause 23.1 (and, also, the language of clause 23.7) contained a requirement of “proximate”, “determining”, “effective” or “efficient cause”. It argued that it is not enough that the triggering event or breach be a cause of the loss sought to be recovered or only for a “but for” test to be satisfied. FWA, on the other hand, drew attention to the breadth of the phrases used in clause 23.1 (“relating to, arising out of, or resulting from (whether directly or indirectly)”), contending they were inconsistent with a text of proximate causation. It argued that those words required only that the triggering event be “a cause” (in the sense of a contributing factor), rather than the proximate or effective cause, of the occurrence in question.[136]The Supreme Court considered questions of causation arising in the context of insurance policies in FCA v Arch Insurance [2021] UKSC 1; [2021] AC 649. In a passage relied on by VietJet in its submissions, at paragraph 162, Lord Hamblen and Lord Leggatt noted that many different formulations can be found in insurance policy wordings of the required connection between the occurrence of an insured peril and the loss against which the insurer agrees to indemnify the policyholder. They noted the variety of phrases used in the sample wordings before the court in that case, and went on to say:
“We do not think it profitable to search for shades of semantic difference between these phrases. Sometimes the policy language may indicate that a looser form of causal connection will suffice than would normally be required, such as use of the words “directly or indirectly caused by”: see eg Coxe v Employers’ Liability Assurance Corpn Ltd [1916] 2 KB 629. The same may arguably be said in the present case of the word “following”
. But it is rare for the test of causation to turn on such nuances.”[137]The question is one of contractual interpretation which must “be answered by identifying (objectively) the intended effect of the policy as applied to the relevant factual situation”: FCA v Arch at paragraph 190 (and see also Lord Briggs at paragraph 320). That is just as much the case when dealing with a contractual indemnity given outside the insurance context: see for example Total Transport Corporation v Arcadia Petroleum (The “Eurus”) [1998] 1 Lloyd’s Rep 351 at 357-361; Pullman Foods v The Welsh Ministers [2020] EWHC 2521 (TCC) at paragraphs 195, 197. As explained by Lord Sumption, when considering an indemnity in a charterparty in ENE Kos 1 Ltd v Petroleo Brasiliero SA (No 2) [2012] UKSC 17; [2012] 2 AC 164, at paragraph 12: "Like all questions of causation, this one is sensitive to the legal context in which it arises. It depends on the intended scope of the indemnity as a matter of construction, which is necessarily informed by its purpose.”[138]In relation to clause 23.1, it is right to note that the words suggest an intended wide coverage. The indemnity applies to Losses “relating to, arising out of, or resulting from (whether directly or indirectly)” the list of items in (a)-(e) of clause 23.1. It is clear that the drafter was not intending by that sort of language to impose a narrow test of causation. Whilst care must be taken not to put too much weight on specific phrases and what they have been held to mean in other cases (and in other contexts), it is of some relevance that the drafter has not used a single causative link, but rather that a list of connecting phrases is used, suggesting an intention to keep the causative link required wide, rather than limited. If the intention had been to require a proximate cause, it appears unlikely that a list of three expressions would have been used disjunctively in the way it appears here.[139]The inclusion of the words “whether directly or indirectly” is also important. In the context of insurance law, where the general principle is one of a requirement of proximate causation, that can be displaced by the policy providing for some other connection. As explained in Brian Leighton (Garages) Limited v Allianz Insurance Plc [2023] EWCA Civ 8, by Popplewell LJ at paragraph 29:
“The parties may expressly provide that losses which result from causes which are more immediate or more remote than the proximate cause are to be included or excluded. Typically this is done by a clause referring to losses caused “directly or indirectly” by the insured or excepted peril.”
In support, Popplewell LJ cited Coxe v Employers Liability Assurance Corporation Ltd [1916] 2 KB 629 (also cited in FCA v Arch in the quotation set out above from paragraph 162), where in holding that the language dictated something other than the proximate cause principle, Scrutton J had noted that there could be no such thing as an indirect proximate cause. In my view, in this clause, the use of “directly or indirectly” is a strong indicator that the causative link may be more remote than a proximate cause.[140]The context in which the indemnity appears confirms the view that it is intended to have a wider causation requirement than proximate cause. As I have already noted, the parties to the JOLCO arrangements did not intend that the Lessor would take redelivery of the Aircraft, and if it did they intended to insulate it from the costs of doing so. There is no need to repeat the points I have already made when considering VietJet’s submission that the indemnity is confined to third party liabilities, but many of those are also relevant to this issue.[141]Accordingly, VietJet was not correct in contending that clause 23.1 imported a test of proximate cause.

Whether FWA can recover an indemnity for costs incurred by other FitzWalter Capital entities

[142]Certain of the costs in respect of which FWA seeks an indemnity were the subject of invoices not addressed to FWA, but to a different FitzWalter Capital entity, which FWA says it is liable to bear. This arises in relation to the costs of enforcement part of the claim, as well as elsewhere. FWA relied in relation to this on the provisions of the Costs Acknowledgement Deed dated 23 August 2022 and on evidence contained in the witness statement of Mr Weinstock, to which I refer below.[143]There was some dispute during the trial as to whether this was a point that VietJet had effectively previously conceded. Part of the context for that is that a number of the claims within the claim for the costs of enforcement overlap with the claim for the costs of these proceedings. The gist of FWA’s position on this was as follows: i) FWA called Mr Weinstock as a witness at the first trial, where his statement included the passages I refer to below about costs liability, but where it was not put to him that FWA was not liable for the costs in question. ii) After the first trial, VietJet agreed to pay FWA’s costs of the trial on the indemnity basis (in view of the indemnity provisions in the sub-leases), and to make a payment on account, without raising any issue that any of the costs claimed by FWA were irrecoverable by it as not having been incurred by it, but by another party. It was said this was against the background that, by that point in time, VietJet was aware that the invoices for FWA’s costs of the proceedings were being issued to entities within the FitzWalter Capital Group other than FWA. iii) After the second trial, VietJet also agreed to pay FWA’s costs on the indemnity basis and a payment on account was ordered, again without any point being taken that costs were irrecoverable having been incurred by a party other than FWA. Moreover, FWA note that by this point in time, an expert instructed by VietJet had noted that a number of the invoices were not addressed to FWA, that VietJet had raised an issue by amendment to its defence as to FWA’s entitlement to such costs, and that FWA had pleaded in reply its reliance on the Costs Acknowledgement Deed. iv) FWA therefore says that it reasonably understood that its entitlement to such costs under the indemnities and the costs rules (insofar as they constitute costs of the litigation) had been conceded as a matter of principle.[144]Whilst I can see why FWA might have considered that VietJet would not pursue this point at the third trial, given what they had accepted in relation to the costs of the first two trials, it does not seem to me that VietJet’s conduct was sufficiently clear to amount to an admission from which they cannot resile for the purposes of this trial, in particular given that VietJet had put the matter in issue in its Defence. It may well be that VietJet has already accepted that certain costs of the first two trials fall within the scope of its liability for the costs orders already made – I say nothing about that, but only about the position at this trial and going forward.[145]However, having said that, once the point had been flushed out as live for this trial, FWA made it clear that they wanted to rely on certain of the evidence given in Mr Weinstock’s witness statement, and made it clear they were prepared to tender him to give evidence (again) at the third trial if VietJet wanted to challenge it. In response, VietJet stated it did not want to cross-examine him and that his evidence on this topic was uncontested and should be read as not having been challenged.[146]That witness statement made it clear that the various professional costs incurred in connection with FWA’s enforcement of its rights against VietJet “are ultimately borne by FWA, regardless of which FitzWalter Capital entity that they are invoiced to.” He said that position had been formalised in the Costs Acknowledgement Deed. As I say, that evidence was accepted by VietJet at the third trial.[147]The Costs Acknowledgement Deed was entered into between FWA and a number of other FitzWalter Capital entities. Under its terms, the parties acknowledged that for administrative reasons, certain engagements of third parties in respect of what was defined as “Project VietJet” had been and would and may be entered into, and costs and expenses incurred, by one or a subset of the parties on behalf of a different subset of parties, and that the parties intended that those costs and expenses be allocated as appropriate between the parties with regard to, amongst other things, the nature of the engagement and by reference to the party/ies that benefited from the engagement or advice in question. FWA acknowledged (under clause 9) that it would be responsible for, and would have the benefit of the majority of the advice, and would therefore be liable to be allocated, and to pay, the majority of the costs and expenses incurred in connection with the relevant engagements and advice. FWA also relied upon the terms of the Declarations of Trust made by the Trustee Owners, which included a very broad indemnity under clause 7.1 requiring FWA to indemnify the Trustee Owners against any costs which they incurred.[148]It may well be that the Costs Acknowledgement Deed could have been drafted with greater precision and detail, however its terms are sufficiently clear. If, for example, another FitzWalter Capital entity had engaged a third party for the benefit of FWA in the enforcement of the claims, it is difficult to see how FWA could resist liability to that entity for the relevant fees given the terms of the Costs Acknowledgement Deed. It is clear from its terms that FWA would have to discharge the liability or, if the other FitzWalter Capital entity paid, that FWA would have to reimburse it. The terms, in particular coupled with the unchallenged evidence of Mr Weinstock that the costs have been ultimately borne by FWA, are sufficient to demonstrate that the costs in question have been met by FWA pursuant to a liability assumed in the arrangements set out in the Costs Acknowledgement Deed.[149]VietJet sought to contend that if this was the case, and the liability for costs incurred by other entities had been passed to FWA, then FWA’s liability for such costs would have arisen out of its voluntary assumption of liability for others’ costs and expenses, rather than matters covered by the indemnity provisions. However, that ignores the context and the reality. If FWA had not undertaken to reimburse other FW entities as it did, there is no reason to think that the other entities would have incurred those costs, and FWA would have had to incur those liabilities directly itself. As the Costs Acknowledgement Deed stated, the fact that other entities might enter into the engagements with third parties was for administrative reasons, but it was always intended that FWA would ultimately bear them. If, for example, FWA had contracted for the services directly, and obtained a loan from one of its affiliates to pay the costs, there would be no question but that recovery of those costs would be available under the indemnities. There is no reason to think the situation should be any different where FWA has contracted with its affiliates effectively to procure services on its behalf, subject to an obligation to reimburse. In its written opening, VietJet suggested it may contend that FWA’s entry into the Costs Acknowledgement Deed and the Declarations of Trust constituted “wilful misconduct” for the purposes of clause 23.2(c) of the sub-leases. However, that was not pursued at trial (for example in cross-examination of Mr Creaven or in oral submissions) and in an agreed list of the points of common ground handed up at the start of the closing submissions, it was recorded that VietJet did not maintain that FWA’s conduct constituted gross negligence and/or wilful misconduct, and no longer relied upon clause 23.2(c). In the circumstances, I say no more about that point.[150]As a result, FWA incurred the costs, or a liability for the costs, and the fact that another FW entity was the contracting party with the third party, or assumed the liability to a third party, does not mean that the costs do not fall within the contractual indemnities in the sub-leases. Remoteness of loss[151]VietJet contended, and by the end of the trial it was common ground between the parties, that clause 23.7 was what the parties referred to as a “damages indemnity”, and was subject to the principle of remoteness of loss (as well as mitigation) applicable to claims for damages for breach of contract. See e.g. Rix J at first instance in The Eurus [1996] 2 Lloyd’s Rep 408 at 432.[152]VietJet did not contend at the trial that there was any remoteness limitation in relation to the clause 23.1 indemnity separate from their argument relating to proximate cause, which I have rejected above. The breadth of the language used in that clause was too great for any such argument that it included a remoteness limitation to be run. It is a true indemnity, applying irrespective of whether there was a breach of contract. See for example the discussion in McGregor on Damages at paragraph 3-021. The delays in exporting the Aircraft[153]Before dealing with the detail of each of the individual claims, it is convenient to deal with the facts in relation to what took place in the lead up to, and after FWA obtained, redelivery of the Aircraft in December 2022. As I have already noted, it took some time for FWA to export the Aircraft from Vietnam and then either to sell or to lease them. Over that period of time, FWA continued to incur costs and expense in relation to the Aircraft in various ways, which form part of the claims to be considered below. One of the points VietJet makes in its defence in relation to at least some of those costs and expenses is that the delay in export was down to FWA’s own failures (as it put it in its written opening, the delay was caused by FWA’s own “incompetence and ignorance”) and/or FWA’s own choices. Whilst VietJet does not continue to pursue a case of gross negligence on the part of FWA, it says that at least some of the costs, even if otherwise recoverable, could not be recovered from VietJet where they were not caused by any of the matters set out in the indemnities and/or were not within the reasonable contemplation of the parties (to the extent remoteness is relevant). The parties also addressed the recoverability of many of the costs by reference to whether they had been reasonably incurred by FWA (which FWA accepted they had to demonstrate in order to recover) and that is to be assessed against the factual background in this period and the difficulties FWA says it encountered in seeking to export the Aircraft.[154]I will start by giving an outline of the facts relating to the attempts to export the Aircraft, before dealing with particular points made by VietJet as to why the delays were down to FWA or, at least, not down to VietJet.[155]As set out at paragraph 63 of Judgment 1, FWA served Grounding Notices in April 2022, demanding the Aircraft be grounded and returned. These were followed in July 2022 by redelivery notices issued by FWA, requiring VietJet to redeliver the Aircraft to Alice Springs airport in Australia. Whilst FWA did not bring a claim directly based on the contention that VietJet was in breach of contract in not so redelivering the Aircraft (and VietJet’s view was that they were not contractually compliant notices), it formed the backdrop to some of the argument, if only as part of FWA’s contentions about VietJet’s uncooperative nature. VietJet did not seek to comply with those redelivery notices (whether or not they were contractually compliant) or otherwise to seek to agree with FWA arrangements for the redelivery of the Aircraft following FWA’s termination of the leasing of them. FWA issued Repossession Notices to VietJet on 1 and 8 August 2022, and on 26 August 2022 commenced these proceedings.[156]Notwithstanding the various notices, VietJet continued to fly the Aircraft until dates between 4 July 2022 and 23 September 2022 MSN 8937 took its last flight on 4 July 2022, MSN 8906 on 5 August 2022, MSN 8592 on 18 September 2022, and MSN 8577 on 23 September 2022. as set out at paragraph 67 of Judgment 1. It did so without payment of rental for that period.[157]Before redelivery of the Aircraft, three of them were parked in Hanoi – MSN 8577, MSN 8592 and MSN 8906. As became clear, at least two of them were not airworthy (MSN 8592 was overdue its 24-month repetitive inspections, and MSN 8906 had fuel leaks in each engine pylon). The fourth Aircraft – MSN 8937 – was parked in Ho Chi Minh City, and had no engines installed. One of its engines (numbered ESN 771335) had been removed from MSN 8937 in July 2022 Given that the engine had only 13 cycles remaining until certain engine LLP limits were due to be reached, FWA had agreed to its removal for maintenance in a letter from Mr Simon Siganto, the Chief Legal Officer of FWCAS and FW Aviation (Support Services) Limited, dated 6 July 2022. and had been shipped by VietJet to Pratt & Whitney Eagle Services Asia Pte Ltd (“Eagle Services”) in Singapore for a shop visit. I will first deal with the three Aircraft in Hanoi, before returning to MSN 8937 and engine 771335.[158]In the lead up to the redelivery of the Aircraft, Mr Creaven set up a meeting with Mr Truong of VietJet, which took place on 8 November 2022. At that meeting, Mr Creaven presented a “registration transfer process flow chart” (one of a series of such flowcharts he had been considering internally) describing how he anticipated the redelivery process would proceed. It was his intention, at this point in time, that the Aircraft be ferried to Clark Airport in the Philippines. It was also his understanding that the authority with which FWA intended to register the Aircraft – the Guernsey Civil Aviation Authority – would not require an ECOA from the CAAV (an understanding subsequently confirmed by the Guernsey CAA, in a letter of 10 November 2022).[159]Mr Creaven and Mr Truong also discussed at the meeting the maintenance required on the Aircraft in the period between redelivery and the removal of the Aircraft from the CAAV registry. Mr Creaven’s internal email reporting on the meeting (effectively his note of the meeting) recorded, among other things, in relation to the three aircraft in Hanoi as follows:
“1. Mr Truong confirmed that Vietnam does not have a 3rd party CAMO system[ Mr Creaven explained that the CAMO system is a concept originating in Europe, and stands for Continuing Airworthiness Maintenance Organisation – a body, which could be independent of the airline (or, particularly for larger airlines, could be an internal function), which would be authorised to maintain the airworthiness of the aircraft. ] so the operating airline is the only organisation entitled to manage compliance with the maintenance programme. … 5. We discussed FWC taking over the maintenance actions at the MRO after the 11th until actual dereg. Truong agreed that this can happen but pointed out that FWC cannot call for work to be performed on the aircraft while it was Vietnamese registered (a point I have raised before). He suggested that VietJet could, subject to agreement between the respective legal teams, provide CAMO support to FWC (including issuing our work orders) until dereg occurred. 6. Mr Truong then explained this concept to Ms Phuong (in Vietnamese) and she stated that VJ could not have a continuing obligation/responsibility between the 11th and the date of dereg. She stated that VJ should be responsible until deregistration and then the redelivery and dereg would happen together. She also stated that I should not approach the CAAV directly on this matter and it should be done by the airline. (BTW: I agree that this is the normal protocol in a non IDERA situation but there is the practical matter of maintaining compliance with the maintenance programme up to the point of deregistration. An example of why this is important is that the engines are on a 7 day run schedule and this requires instruction from the airline to the MRO[ MRO generally refers to a Maintenance, Repair and Overhaul organisation. ]).”
[160]In other words, although Mr Creaven and Mr Truong had reached a potential solution regarding ongoing maintenance requirements prior to deregistration, namely that VietJet might provide CAMO support to FWA (including issuing FWA’s work orders) between redelivery and deregistration, Ms Phuong (who Mr Creaven understood was more senior than Mr Truong) disagreed. Her view was that VietJet should be responsible for maintenance up to redelivery, but beyond that point would not have any ongoing obligation or responsibility for maintenance. They would not provide support to FWA after redelivery.[161]Mr Creaven and Mr Truong also discussed the situation with MSN 8937, which was more problematic due to the removed engines (and other related components). Mr Creaven’s note recorded that he expected this Aircraft “will take considerably longer to move tha[n] the other 3.”[162]There was a dispute between the parties as to whether Mr Truong declined to meet with Mr Creaven thereafter but, either way, both parties agree that Mr Truong informed Mr Creaven that he would only address technical matters, and that he provided names of other VietJet representatives who would address legal matters.[163]On 16 November 2022, Bryan J made a consent order (referred to at paragraph 69 of Judgment 1) which, among other things, ordered VietJet to give FWA possession of the Aircraft on an “as is, where is” basis, and to instruct Eagle Services to give FWA immediate possession of the Engine 771335 on an “as is, where is” basis. The order included provisions requiring VietJet to write letters consenting to FWA’s deregistration and export of the Aircraft. On 14 December 2022, VietJet sent a letter to the CAAV stating that it consented to the deregistration and export of the Aircraft, a position it repeated in further letters dated 3 March, 15 March and 18 April 2023.[164]Possession of the Aircraft was transferred from VietJet to FWA in Vietnam on 15 December 2022. The NEO Aircraft were then de-registered by the CAAV on 16 December 2022, and were re-registered on the Guernsey register on 20 December 2022. As to the CEO Aircraft: i) MSN 8592 was de-registered by the CAAV on 16 January 2023, and re-registered on the Guernsey register on 17 January 2023; and ii) MSN 8577 was de-registered by the CAAV and re-registered in Guernsey on 19 January 2023.[165]In the middle of February 2003, Silva Star Capital PTE Ltd lodged a claim before the Hanoi People’s Court – the Shareholder Proceedings – as described in Judgment 1 starting at paragraph 74. This resulted in a preliminary injunction in Vietnam suspending the deregistration decisions and declaring VietJet entitled to the continued registration of the Aircraft. Whilst the preliminary injunction was withdrawn on 4 April 2023 (as Picken J noted at paragraph 80 of Judgment 1, a few days after FWA had brought contempt proceedings in this jurisdiction against VietJet), the underlying proceedings continued.[166]On 7 March 2023, the Aviation Working Group (the “AWG”) issued a “Watchlist Notice” stating that the orders of the Vietnamese Court were inconsistent with Vietnam’s obligations under the Cape Town Convention. The AWG is an industry body, comprised of aviation manufacturers, leasing companies and financial institutions, which seeks to promote international aviation financing and leasing. Among other things, it monitors adherence to the Cape Town Convention by contracting states. The 7 March 2023 Watchlist Notice was followed, in April 2023, by the AWG downgrading Vietnam in its “CTC Compliance Index” (which is a monitoring tool used by the AWG to evaluate how contracting states implement and adhere to the Cape Town Convention and Protocol). There were further Watchlist Notices from the AWG in respect of Vietnam’s conduct regarding FWA’s attempts to export the Aircraft throughout the rest of 2023 and into 2024. The AWG Watchlist Notice was sufficiently serious for it to cause Vietnam Airlines (the flag carrier airline of Vietnam) to write to various government ministries, and the Hanoi Court, in a letter dated 28 March 2023 explaining the importance to it (and its ability to obtain competitive finance) of the Cape Town Convention and Protocol and Vietnam’s adherence to its obligations under those instruments. It urged the recipients to provide guidance to ensure that the Cape Town Convention and Protocol were complied with by Vietnam.[167]On 12 April 2023, MSN 8577 was inducted into the VAECO hangar for the maintenance required to return it to operation. It was there until 14 May 2023, when the maintenance work was completed such that the Aircraft was eligible for a Guernsey Certificate of Airworthiness (“COA”), which was then issued by the Guernsey register on 16 May 2023. MSN 8906 and MSN 8592 in turn went into the VAECO hangar on 13 June 2023 and 26 July 2023 respectively. I will return to the dates specific to those Aircraft after having summarised the exchanges with the Vietnamese authorities from May onwards, and the initial attempts to export MSN 8577.[168]The problem that emerged in this period was, in short, that whereas FWA’s understanding was that the exercise of its rights to export the Aircraft under an IDERA, under the Cape Town Convention and Protocol, did not require an ECOA to be obtained, and the CAAV had not suggested that an ECOA would be required for the Aircraft to be exported, the Vietnamese Customs Authority (the “VCA”) took the different view that one was required.[169]In an email dated 15 April 2023 to Airimex, copied to Mr Creaven, Mr James Peroff (a technical consultant contracted through CAE Parc Aviation (“CAE Parc”) Mr Peroff had previously been contracted to the project through SGI Aviation, until mid-September 2022, and was then re-engaged through CAE Parc in early February 2023. ) noted that the Aircraft had been deregistered from the CAAV registry without any ECOA having been issued by the CAAV, and suggested that there now seemed to be “complications between the departments on how to export/release the aircraft.”[170]Unbeknown at the time to FWA, on 4 May 2023, VietJet wrote to the CAAV enquiring whether the Aircraft could be exported without the issue of an ECOA by the CAAV. A few days later, on 10 May 2023, also unbeknown to FWA, Vina Legal (who appear to have been acting for VietJet) wrote to the VCA, enquiring whether the Aircraft could be exported without an ECOA issued by the CAAV, and whether VietJet could apply to export the Aircraft.[171]FWA, for its part, sought confirmation that an ECOA would not be required, first in a letter from Mr Siganto to the CAAV dated 11 May 2023. Also, FWA’s Vietnamese lawyers, T&G Law Firm, wrote to the VCA in a letter dated 22 May 2023, applying to export MSN 8577, and stating that the Guernsey register had confirmed that an ECOA was not required.[172]On 29 May 2023, the VCA stated, in separate letters sent to FWA’s lawyers (T&G Law Firm) and VietJet’s lawyers (Vina Legal), that FWA would need to obtain an ECOA from the CAAV before customs clearance would be granted. As for the CAAV, it wrote separate letters to VietJet (on 30 May 2023) and FWA (on 31 May 2023) stating that it had no jurisdiction over the (now foreign-registered) Aircraft, but that it could conduct the necessary review to issue an ECOA if requested by an authorised party under the IDERA and if approved by the Guernsey Aviation Authority to do so. The VCA’s requirement of an ECOA was later criticised by the AWG in further Watchlist Notices, as inconsistent with the Cape Town Convention.[173]FWA applied for an ECOA for MSN 8577 on 9 June 2023. The CAAV notified FWA that, as part of their ECOA approval process, the CAAV required that MSN 8577 perform a flight. As a result, a test flight for MSN 8577 was performed on 31 July 2023, and a copy of the flight log signed by the crew, confirming no defects, was provided to the CAAV. However, at a meeting Mr Creaven attended with the CAAV on 3 August 2023, the CAAV said that it required a further test flight for MSN 8577. Following up on that meeting, FWA sent an email (dated 9 August 2023) to the CAAV recording that they had received confirmation from the Guernsey aviation authority that they had no issues with the CAAV addressing any outstanding concerns on issuing the ECOA, saying these could be recorded in the exceptions box on the ECOA or through completing another flight with CAAV personnel on board.[174]This was discussed further at another meeting between Mr Creaven and the CAAV on 23 August 2023, at which the functions to be demonstrated on the further test flight for MSN 8577 were presented to and agreed by the CAAV. The further test flight then took place the following day, 24 August 2023.[175]Meanwhile, on 18 August 2023, the CAAV had written to VietJet notifying it that MSN 8577 was in the final stage of inspection and met the standards and conditions for an ECOA, and enquired as to its official position regarding its rights to MSN 8577. On 8 September 2023, VietJet responded to the CAAV asserting that VietJet “still has the legitimate rights and interests in the [8577] Aircraft”, contending that the CAAV did not have jurisdiction to issue an ECOA (and enclosing an advice from Vina Legal in support), and expressing its “hope that the CAAV will review, evaluate, and make objective, responsible decisions in accordance with regulations of law, ensuring the legitimate rights and interests of VJA with respect to the Aircraft.” VietJet then wrote to the Deputy Prime Minister of Vietnam on 11 September 2023 again contending that the CAAV did not have jurisdiction to issue an ECOA (and again enclosing an advice from Vina Legal) and requesting government “attention and support” to “protect the legitimate rights and interests of VietJet” in relation to the Aircraft.[176]VietJet continued in a similar vein on 2 October 2023 by writing to the Deputy Minister of the Ministry of Transportation, similarly contending that the CAAV did not have jurisdiction to issue an ECOA, and expressing its “hope that the Deputy Minister will consider and assess in accordance with the laws to ensure VJA’s legitimate rights and interests towards the disputed Aircraft while there has not been a final decision from the English Court on the dispute between related parties.” VietJet followed up by writing again on 10 October 2023 to the Ministry of Transportation stating that the CAAV did not have the jurisdiction to issue an ECOA since the Aircraft had already been re-registered in Guernsey.[177]On 9 October 2023, the CAAV sent FWA a formal letter (copying “relevant individuals and agencies”), referring to(a) the technical assessment and test flight the CAAV had performed on the MSN 8577, and(b) that MSN 8577 had a Guernsey COA issued on 16 May 2023, stating that MSN 8577 fully met the airworthiness criteria of ICAO and the regulations on export airworthiness standards for Vietnam and the airworthiness requirements of Guernsey. The CAAV attached an annex advising that they could not issue an ECOA because under its practices and procedures it would do so only at the moment of deregistration.[178]To return briefly to the timeline relating to the other two Aircraft in Hanoi: i) On 13 June 2023, MSN 8906 was inducted into the VAECO hangar for its maintenance work. This was completed on 25 July 2023 and a Guernsey COA was issued for MSN 8906 on 3 August 2023. On 5 August 2023, a test flight was performed for MSN 8906 then, on 14 December 2023, the CAAV requested a further test flight for MSN 8906 as part of its ECOA evaluation process. On 25 December 2023, the CAAV issued a letter certifying that MSN 8906 fully met the regulations on export airworthiness standards of Vietnam, but noting they were not in a position to issue an ECOA because under their practices and procedures they would only issue one at the point of deregistration. ii) Aircraft MSN 8592 was inducted into the VAECO hangar on 26 July 2023. VAECO completed its return to operation maintenance on 12 September 2023, and MSN 8592 was issued with a Guernsey COA on 19 September 2023. On 20 September 2023, a test flight was performed for MSN 8592.[179]It should also be noted that FWA, fearing interference by VietJet with the process of exporting the aircraft, had sought the assistance of the English Court over this period. Waksman J had granted an order on 31 March 2023 prohibiting VietJet from taking steps to re-register the Aircraft with the CAAV or interfering with FWA’s right to possession, custody and/or control of the Aircraft (originally made without notice, but subsequently continued after a return date when VietJet did not object to its continuation). On 16 February 2024, Foxton J made a further order which, among other things, ordered VietJet not to interfere with “the Claimant’s right to possession, custody and/or control of the Aircraft, including in relation to any aspect of the export/re-export processes, or any steps required to physically transfer the Aircraft from Vietnam.” It also ordered VietJet not to communicate with the CAAV or the Vietnamese customs authority in relation to the export of the Aircraft (except pursuant to a regime set out in the order).[180]In late February 2024, FWA was informed that the VCA was prepared to inspect MSN 8906 and issue customs clearance. On 27 February 2024, FWA appointed customs agents and submitted a request to export in relation to MSN 8906. In early March 2024, the VCA confirmed to FWA that, subject to final inspection MSN 8096 could be exported from Vietnam, and it was ferried from Hanoi to Ho Chi Minh City in preparation. As Picken J noted at paragraph 87 of Judgment 1, that took place on 4 March 2024, then that evening a letter was written by the judge in the Shareholder Proceedings (which had lain dormant for just under a year) to the CAAV and the VCA seeking information about the import and export procedures of the Aircraft. Final inspections on the Aircraft were then suspended for a period.[181]Check flights were performed by MSN 8906 on 10 and 17 March 2024 whilst waiting for customs and departure clearances. However, on 22 March 2024, the Customs Authority at Tan Son Nhat Airport (which serves Ho Chi Minh City) wrote a letter to the CAAV stating they required a standard ECOA for MSN 8906. The CAAV responded by letter dated 28 March 2024 to the VCA, confirming that it had inspected and certified that the Aircraft were airworthy, but that an ECOA could only be issued in respect of aircraft registered in the exporting country, and requesting that VCA ensure compliance with the Cape Town Convention “and to avoid Vietnam’s exposure to economic, commercial and litigation risks” and “[p]revent any acts of interference and influence on the civil dispute settlements among non-state entities.”[182]On 4 April 2024, Mango Trading Joint Stock Company (“Mango”, one of the shareholders which had commenced the second set of Shareholder Proceedings in Vietnam: see paragraph 77 of Judgment 1) applied to the Court in Hanoi for an on-site inspection and appraisal of the Aircraft. This appears to have resulted in the Court issuing a request, on 15 April 2024, to the Court in Ho Chi Minh City for an inspection and appraisal of the NEOs, and on 22 April 2024 a direction for an inspection and appraisal of the CEOs.[183]Mr Creaven explained that, on 5 April 2024, FWA were advised that the responsible ministries had met and agreed that the CAAV should issue an ECOA for MSN 8906, which the CAAV had agreed to do if the centralised VCA requested it from them. The VCA then wrote to the CAAV on 10 April 2024 requesting that it issue an ECOA. Mr Creaven explained that FWA then made an application for an ECOA for MSN 8906 on 13 April 2024. An ECOA was issued by the CAAV on 15 April 2024, which FWA submitted to the VCA. On 19 April 2024, the VCA stated that they would only accept the ECOA if it came to them directly from the CAAV, which was then provided. The ECOA contained an “exception statement” on its reverse side stating (in translation from the Vietnamese):
“This Export Certificate of Airworthiness is issued by the CAAV to facilitate the Authorized Party under the IDERA in exporting Aircraft MSN 8906 out of Vietnam and reflects the responsibilities of the Socialist Republic of Vietnam in complying with the enforcement of the Cape Town Convention and Protocol. This Export Certificate of Airworthiness is no longer necessary for supporting the aircraft registration transfer under the standards set forth in Section 3.2.4, Chapter 3, Part II, Supplementary Agreement 8 under the 1944 Chicago Convention as the aircraft has already been registered in Guernsey and Aircraft MSN 8906 has been granted a Certificate of Airworthiness by the Guernsey aviation authorities as per the standards set by the International Civil Aviation Organization (ICAO) and in accordance with the standards of Vietnam as to aviation safety.”
[184]Issuing an ECOA with such an exception was something Mr Creaven had suggested to the CAAV in a meeting back on 3 August 2023 when the CAAV was requiring test flights despite the fact the Aircraft already had Guernsey COAs (and the Guernsey authority had confirmed around the same time that it would accept such an exception given that it did not require an ECOA from the CAAV anyway).[185]On 4 June 2024, Mr Creaven was advised that the VCA would inspect MSN 8906, which it did, and customs clearance was issued on the same day. On 10 June 2024, FWA sent a “Letter of Petition for expeditious Support in Export of Foreign Aircraft” for MSN 8906 to the Deputy Minister of Transport seeking assistance on obtaining a departure flight permit. Once FWA was able to obtain approval to export MSN 8906, it departed Vietnam and flew to Malaysia on 20 June 2024 (and then subsequently, on 26 June 2024, flew to Australia).[186]On 7 August 2024, applications were made for an ECOA for MSN 8577 and MSN 8592, which were both issued by the CAAV on 28 August 2024. Once approval to export these two Aircraft had been obtained by FWA, they both departed Vietnam: MSN 8577 on 5 October and MSN 8592 on 10 October 2024.[187]The timeline relating to MSN 8937 also needs to be addressed. As noted above, the situation with this aircraft was different because at redelivery both its engines were off wing, and one had been flown to Eagle Services for a shop visit. At Eagle Services, a borescope report of the engine dated 9-10 September 2022 documented various items of damage inside the engine and confirmed that it was unserviceable.[188]On 9 September 2022, Mr Siganto had emailed Eagle Services giving notice of the English proceedings which FWA had commenced, requesting certain information (including a schedule of the planned works, proposed timeframes and an estimate of the costs), and asking Eagle Services to confirm they would not take any further instructions from VietJet or return the engine to VietJet. Eagle Services confirmed in response that it had been contracted by International Aero Engines (“IAE”) for the maintenance of Engine 771335 and that FWA should instead raise the matter with VietJet and its regional IAE Customer Manager. Subsequently, pursuant to the consent order dated 16 November 2022, VietJet emailed Eagle Services (copied to FWA) on 2 December 2022, instructing them to provide FWA with possession of Engine 771335.[189]On 16 December 2022, Mr Siganto notified Eagle Services that FWA wanted to bring the shop visit for the engine under its control and would appreciate direct engagement. Eagle Services responded positively but stated that the Pratt & Whitney MRO network was facing challenges and cautioned that an induction date was not clear. It appears that, in this period, there was something of a capacity backlog in the Pratt & Whitney engine shop network, a backlog which Mr Creaven explained became worse in early 2023 due to premature engine removal rates occurring on the Pratt & Whitney GTF engine (as also noted at paragraph 99 of Judgment 2). Despite FWA pressing for an early induction, that did not take place. The date for a likely induction slipped back and, ultimately, a fixed price agreement for the work on the engine was signed on 21 March 2024, and on 3 June 2024 repair work on engine 771335 commenced. The work on the engine was not completed until February 2025.[190]The Guernsey aviation authority issued a COA for MSN 8937 on 20 February 2025, and the CAAV issued a formal ECOA for MSN 8937 on 4 March 2025. It then departed Vietnam on 13 March 2025 after FWA had obtained approval for its export. The parties’ submissions on particular points of delay, and their effect[191]VietJet made a number of points in support of their general theme that the delays in exporting the Aircraft were down to FWA, and the costs and consequences associated with those delays could not be recovered from VietJet under the indemnities.[192]First, VietJet contended that Mr Creaven assumed, from the outset, that VietJet would act in a hostile manner and therefore denied himself, and FWA, the chance to ask for VietJet’s assistance in, for example, obtaining an ECOA. VietJet pointed out that there had been constructive engagement from VietJet in relation to technical matters. It was alleged that if Mr Creaven had used VietJet’s assistance, it would have made the redelivery and export process significantly quicker, cheaper, and more straightforward.[193]I do not accept that. It is right that there was some level of co-operation in technical discussions, and that VietJet agreed to FWA’s possession application. It is also right that VietJet’s engagement of external consultants to assist with redelivery (namely, Alton Aviation Consultancy and Temple Aviation Asset Management) had increased cooperation on VietJet’s side, as Mr Creaven accepted in his oral evidence. However, Mr Creaven had reasonable grounds to have a wariness about VietJet, given the fact that VietJet had continued to fly the Aircraft after the Termination Notices had been issued, and did so without payment of rental. Even if the Redelivery Demands were not contractually compliant as such, and were simply requests, VietJet did not comply with them, or make any counterproposals for redelivery at a different location than Alice Springs. Nor did VietJet take any steps to start putting the Aircraft into the Return Condition.[194]When Mr Creaven sought to engage with VietJet about maintenance on the Aircraft in advance of deregistration, whilst it may be right to say that Mr Truong appeared willing to be helpful, it also appears that he was overruled by Ms Phuong, who said that VietJet would not provide the assistance Mr Truong had suggested it might.[195]The potential difficulties were illustrated on the date of redelivery, 15 December 2022, which was also a date when engine runs were due on MSN 8906 as part of the necessary storage maintenance requirements. FWA were dependent upon VietJet performing the engine runs, or issuing a work order for them to be performed, given (as addressed further below) it was only a Vietnamese airline that could issue a work order for maintenance on a commercial aircraft on the Vietnamese register. However, VietJet refused to carry out the engine runs or issue a work order on the basis that the condition for transfer was “as is, where is”, and they did not agree to provide any work orders to take place after the redelivery date. It was only after negotiation and when Mr Creaven said he could not take possession of MSN 8906 without the engine runs being performed that VietJet relented and did perform them in the evening of 15 December.[196]Indeed, not only did Mr Creaven have reasonable grounds to fear a lack of co-operation, those turned out to be well-founded fears. VietJet and its shareholders sought, to put it fairly mildly, to make life difficult for FWA in its attempts to export the Aircraft. That included the Shareholder Proceedings in Vietnam and the correspondence with the CAAV and the VCA, behind the back of FWA, which appears to have had little purpose other than to seek to put spanners in the works of what FWA was trying to do. The concern about VietJet’s attempts to hamper the export was clear and obvious. It was also, for example, reflected in disclosure orders made in this case by Picken J, who delayed FWA’s export-related disclosure “to avoid any potential misuse of the disclosed documents being made by VietJet”. In a ruling dated 6 December 2024, [2024] EWHC 3225 (Comm), Picken J so explained paragraph 17 of his earlier order, dated 18 October 2024.[197]Against the background of what VietJet actually did, it is simply unrealistic for VietJet now to contend that if only FWA had asked it to assist, it would have provided that assistance and everything would have gone more smoothly. It certainly cannot be said that the fact that FWA did not seek VietJet’s assistance in the ways VietJet now suggests it might have done somehow prevents the indemnities from operating – it is not sufficient to break the chain of causation between FWA’s loss and the various matters that trigger the indemnities (for example, under clause 23.1).[198]Related to this, VietJet contended that the assertions made by Mr Creaven in his witness statements went too far in describing VietJet’s lack of cooperation during the redelivery process. It may be that on occasion they did, but as I have set out above, Mr Creaven had good grounds for wariness, and the course he adopted was not unreasonable in the circumstances. FWA’s claim is not brought on the basis that VietJet were in breach of contract in acting unreasonably in these sorts of ways, but rather on the basis of the indemnities, and “lack of cooperation” in these respects was not something relied upon as having triggered the indemnities. In the circumstances, the fact that Mr Creaven may have sought to have described VietJet as slightly less uncooperative than they actually were does not change any of the analysis.[199]Second, VietJet criticised Mr Creaven’s decision to deregister the Aircraft from the Vietnamese register very shortly after the redelivery date. (The NEOs were deregistered almost immediately and the CEOs in January 2023). It was said his decision to do so without identifying the need for an ECOA and obtaining one led to the Aircraft remaining in Vietnam for over a year longer than otherwise would have been the case. I will deal separately below with the question whether an ECOA from the CAAV was or should have been required. However, an important part of Mr Creaven’s consideration here was that, as he understood it, it was only a Vietnamese airline operator who could issue work orders whilst an aircraft remained on the Vietnamese register, such that the only realistic way in which FWA could have taken over the maintenance that was necessary was by deregistering the Aircraft from the CAAV and reregistering them with another registry.[200]It was necessary to accomplish maintenance on all of the Aircraft, at least three of which had been returned by VietJet in an unairworthy condition. FWA therefore needed to restore them to flight ready condition. Mr Creaven’s position was that, in the circumstances pertaining here, the Aircraft needed to be deregistered in order for FWA to be able to control that process. FWA could not have the work carried out through a third party CAMO because Vietnam does not recognise third party CAMOs (as was accepted by VietJet). Moreover, it was Mr Creaven’s clear evidence that work orders on Vietnamese registered aircraft could only be issued by the local operator maintaining airworthiness control i.e. a Vietnamese airline.[201]VietJet said he was wrong about that. They relied upon Mr Brown’s evidence that a local certified MRO (Maintenance, Repair and Overhaul organisation) or engineer could raise a technical log and record maintenance which had been accomplished or that, whilst Vietnam does not recognise third party CAMOs, an experienced entity such as CAE Parc, which had approval and credibility with the CAAV, could be authorised to issue work orders or potentially have provided FWA with an “off-the-shelf” low-utilisation maintenance programme for CAAV approval.[202]However, the evidence was clear that only a Vietnamese airline could issue work orders in respect of aircraft on the CAAV register. This was reflected in what Mr Truong told Mr Creaven at their meeting on 8 November 2022 (as recorded in Mr Creaven’s email of the same day reporting on that meeting), and was Mr Creaven’s clear and consistent evidence about what he had come to understand from those he consulted in Vietnam. Whilst the Aircraft was on the Vietnamese register, a local MRO would not take instructions from FWA, and the Aircraft could only be maintained by a maintenance facility or maintenance engineers approved by the CAAV and the tasks performed had to be determined and assigned by the Vietnamese airline operating the Aircraft. Mr Creaven confirmed in cross-examination that he had also been told by Vietstar and VAECO that “they will not accept a work order for a Vietnamese-registered aircraft, unless it comes from the airline, or the authority.”[203]Mr Brown’s evidence to the contrary on this was somewhat unsatisfactory. It did not appear to have been grounded in any particular experience (he had no experience of exporting an aircraft from Vietnam) or in any particular regulation. He had come up with his suggestions based on what he thought might be possible, but without having sought assistance from anyone in Vietnam – he confirmed in his oral evidence that he was reliant on what was online and what he could research. He confirmed, for example, that he had not found a regulation in Vietnam that expressly permitted independent CAMO providers, whilst also saying that he had not found one to the contrary. He said he had carried out research on the CAAV website, which he described as a “two-minute Google search”, and that what he had found primarily dealt with explaining that the operating entity of a commercial aircraft in Vietnam had to have the management structure and meet the technical requirements to control the airworthiness of the aircraft, but that it did not say that was the only entity that could do it. In other words, unless he found something in his perfunctory searches saying his proposed courses of action were not possible, he assumed that they were. He described a possibility of FWA registering as the owner of the aircraft in Vietnam, which he thought was “probably possible” but suggested that “the hoops and what and so on” would be “hugely legal”.[204]The upshot of the evidence was that neither Mr Creaven nor Mr Brown was able to say with complete confidence what the legal position was in Vietnam, or what the CAAV was likely to permit if asked (for example for a derogation or exception to the normal procedure). However, the understanding of those involved in the industry in Vietnam was the understanding that Mr Creaven’s evidence conveyed, and anything beyond that was to some degree, at least, uncertain, if it could be done at all. Mr Brown’s various possibilities were, at the end of the day, little more than speculations on what might have been attempted and what might have succeeded, although it seems reasonable to suppose that, even if realistically possible, all would have required engagement (probably lengthy) with the CAAV and whichever other organisations might have needed to be involved (whether governmental or commercial), and it is not possible to say on the evidence at trial whether any of them would have ended up with any of the Aircraft leaving Vietnam any sooner than in fact they did.[205]Mr Brown also suggested as an option that there could have been an agreement between FWA and VietJet where the Aircraft remained on the Vietnam register and VietJet continued with airworthiness management until the Aircraft were ready to fly. It may be that is a practical option in certain situations of redelivery of leased aircraft, however it is difficult to see how it would have been a realistic option in this case where the parties were already in litigation, and given Mr Creaven’s understandable lack of confidence in VietJet’s cooperation and the subsequent steps VietJet sought to take to disrupt the export process.[206]In all the circumstances, it was perfectly reasonable for Mr Creaven to think that the Aircraft needed to be deregistered from the CAAV in order for FWA to be able to carry out the maintenance and repair work required.[207]Third, VietJet contended that FWA was at fault in failing to identify at an early stage that it would need an ECOA from the CAAV in order to export the Aircraft. FWA said it ought not to have needed an ECOA, and was reasonable in proceeding on the basis that it did not need one.[208]The international legal framework that was in place to deal with these situations is clear. Vietnam has been a Contracting State to the Cape Town Convention and the Protocol since 1 January 2015 and has made a declaration under Article XXX(1) of the Protocol that it will apply the provisions of Protocol Article XIII (“De-registration and export request authorisation”) in connection with, and facilitating and effecting, the remedies of de-registration and export by means of an IDERA under Protocol Article IX(1). Article IX(1) provides that a creditor may procure the de-registration and export of the aircraft from the territory in which it is situated. One of the routes through which a creditor may do so, and the one pursued by FWA, is through an IDERA that has been lodged with the Registry Authority by the person in whose favour the authorisation has been recorded (referred to in Protocol Article XIII(3) as the “authorised party”): see Protocol Articles XIII and IX(5)-(6). Under Protocol Article XIII(4):
“The registry authority and other administrative authorities in Contracting States shall expeditiously co-operate with and assist the authorised party in the exercise of the remedies specified in Article IX.”
See also Protocol Article X(6)(b):
“the applicable authorities shall expeditiously co-operate with and assist the creditor in the exercise of such remedies in conformity with the applicable aviation safety laws and regulations.”
[209]Protocol Article IX(5) makes it clear that the registry authority must (subject to any applicable safety laws and regulations) honour the IDERA if the creditor or other authorised party certifies, where so required by the registry authority, that all registered interests ranking in priority to that of the creditor have been discharged or that the holders of such interests have consented to the de-registration and export. Thus, as explained in the Official Commentary to the Cape Town Convention and Protocol (Revised Fifth Edition, by Professor Goode) (“the Official Commentary”) at paragraph 5.50:
“… the IDERA machinery is purely documentary, dispensing with the need for the regulatory authority to investigate external facts. … Although the Protocol refers only to obligations of the registry authority and other administrative authorities, it is the duty of a Contracting State to ensure that under its domestic law other State organs or organisations authorized by the State to effect or facilitate de-registration and export and physical deliver, for example export agencies, are precluded from impeding, by action or inaction, the implementation of the Protocol provisions on de-registration and export, including by requiring a procedure where the creditor cannot exercise these remedies directly without the co-operation of the debtor.”
[210]In other words, the purpose of the IDERA and the machinery in the Protocol is to enable creditors quickly and without interference, and without lengthy and/or bespoke national procedures, to de-register and seek the export of an aircraft if a lessee defaults.[211]Under that regime, there is no requirement for the aviation authority in the state from which the aircraft is being exported to issue an ECOA in order for the export to take place. Moreover, the Guernsey Aircraft Register made it clear (in a letter dated 10 November 2022) that it did not require an ECOA issued by the CAAV.[212]FWA was right, therefore, in its view that it ought not to have required an ECOA from the CAAV in a situation where the receiving authority – here, Guernsey – would not require one. Moreover, in practice, FWA did not need an ECOA for de-registration (the CAAV did not elect to issue one) and nor did it need one for re-registration in Guernsey.[213]VietJet said that Mr Creaven had anticipated at an early stage that the CAAV may insist on issuing an ECOA, which ought to have informed his conduct. However, the documents that VietJet relied upon to suggest that Mr Creaven had anticipated that the CAAV might elect to issue an ECOA were part of a series of documents where Mr Creaven was anticipating possible routes by which the Aircraft might be exported and possible outcomes, which he was developing and changing as he looked more closely at the situation. The fact that he contemplated at one stage that the CAAV might elect to issue an ECOA (and therefore would have to inspect the Aircraft in order to do so) does not advance VietJet’s case. His planned course of action was consistent with the international regime applicable, that did not require the CAAV to issue an ECOA. Moreover, there was nothing in his documents to suggest he had anticipated that the Vietnamese Customs Authority might insist upon an ECOA before it would give permission for the Aircraft to be exported, which is what turned out to be the sticking point.[214]As I have already described, the VCA took the view that an ECOA was required in order to provide customs clearance for export of the Aircraft. The provision of Vietnamese law that was said to require an ECOA was Article 10 of Decree 68/2015. It was headed “Export of aircrafts” (in translation), and specified (among other things):
“1. Conditions exporting aircrafts: a) There shall be the unexpired Certificate of conformance with conditions for export issues or recognised by a regulatory agency. … d) The aircraft has been deregistered of Vietnamese nationality. … 4. If the IDERA has been registered according to regulations in this Decree, only the authorised party of the INDERA is entitled to apply for exporting the aircraft.”
This was the subject of an email exchange between Mr Siganto and Mr Creaven (and others) in April 2023 making it clear that the FWA view was that as an authorised party under IDERAs, FWA had the right to export the Aircraft pursuant to Article 10.4. However, the VCA view was that Article 10.1 required an ECOA. There was no expert evidence on Vietnamese law at the trial, and VietJet did not seek to prove that as a matter of Vietnamese law Article 10.1 required the CAAV to issue an ECOA, but it is clear that this was the view of the VCA at the time. At one point in his cross-examination, Mr Creaven accepted that his understanding of what was being referred to at Article 10.1 was an ECOA, but at other points referred to his view that it could equally have been referring to a certificate of airworthiness more generally. In its written closing submissions, FWA sought to assert that it was “specifically advised by both of its Vietnamese lawyers that an ECoA was not required and that Article 10 of Decree 68 would be satisfied by a Certificate of Airworthiness issued by Guernsey.” However, the evidence it sought to rely on to support that proposition was not evidence that had been given by any witness at trial. Rather, the only source material sought to be relied upon in this respect was a witness statement filed by one of FWA’s solicitors (a partner at Quinn Emanuel) – Mr Paul Baker – whose sixth statement, dated 10 July 2023, had been filed in support of an interlocutory application (seeking an order for VietJet to take steps to assist in the export of the Aircraft). In the course of that statement, Mr Baker did say he had been advised in substantially the terms referred to in FWA’s closing submissions, by two firms of Vietnamese lawyers who he introduced in his statement as assisting him in the interpretation of Vietnamese law and procedure, and where he emphasised that nothing was intended to constitute a waiver of privilege in respect of that advice. However, not only was this not evidence given at the trial, but was also not said to be advice given to FWA and relied upon in its decision-making (as opposed to given to Quinn Emanuel for the purpose of explaining an understanding of the Vietnamese law position to the court for the interlocutory application in question). It does not appear it was intended to be relied upon at trial, which is why no doubt Mr Baker said he was not waiving privilege, and why I was not shown any of the underlying legal advice. a) There shall be the unexpired Certificate of conformance with conditions for export issues or recognised by a regulatory agency. … d) The aircraft has been deregistered of Vietnamese nationality. …[215]There was, therefore, at least some doubt whether under the locally applicable Vietnamese regulation, an ECOA might be required. However, the provision was certainly not sufficiently clear that it can be said that FWA must have appreciated, at the time, that it would require an ECOA, or that in any event it would override Vietnam’s international obligations under the Cape Town Convention and Protocol. Indeed, Mr Creaven’s evidence was that his understanding at the time, from dealing with these sorts of processes regularly, was that the obligations under an international treaty would override conflicting local law.[216]It was clearly FWA’s and Mr Creaven’s view at the time that an IDERA (without an ECOA) ought to have sufficed for export. That was the reason why Mr Creaven proceeded to deregister the Aircraft from the CAAV without asking for an ECOA – he did not think he needed one. That view, as a matter of general industry understanding, was not unreasonable, as demonstrated by the fact that the insistence from the VCA that an ECOA be issued before it would provide customs clearance was subsequently found by the AWG to have been inconsistent with the Cape Town Convention, and it resulted in Vietnam’s downgrade in the CTC compliance index.[217]In light of the above, it was reasonable for Mr Creaven to have considered that FWA would not require an ECOA from the CAAV in order to export the Aircraft to Guernsey. That this was something that the VCA required was contrary to international practice, and to Vietnam’s obligations under the Cape Town Convention and Protocol, as the AWG noted. It was legitimate and reasonable for Mr Creaven to have considered that whatever the local practice or regulations in Vietnam, the international regime to which Vietnam had signed up would support FWA’s position, and they would be able to export the Aircraft without an ECOA.[218]But, in any event, even if Mr Creaven ought to have anticipated that an ECOA from the CAAV might have been required, it is difficult to see what other route he might reasonably have followed. The Aircraft needed maintenance and repair work – at least three of the Aircraft were not airworthy on redelivery and all the Aircraft required ongoing preservation maintenance to maintain their condition, which needed to be undertaken in order for any certificate of airworthiness (including an ECOA) to be issued. Mr Creaven needed to know that he could direct this be done once the Aircraft had been redelivered (including because, as he noted in his evidence, the CAAV had published guidelines whereby they advised that they may take up to 30 days to process an ECOA application). As noted above, whilst the Aircraft were registered with the CAAV, FWA could not issue work orders (work orders on Vietnamese Aircraft only being capable of being issued by a Vietnamese airline), and VietJet had made it clear that they would not issue such orders on FWA’s behalf. Nor is it surprising, or unreasonable, that FWA was not willing to put itself in VietJet’s hands in terms of maintenance post redelivery given the lack of co-operation that had been shown. The Aircraft had, therefore, to be deregistered from the CAAV in order to enable the necessary maintenance works to be carried out, including for the purpose of applying for an ECOA if it turned out that one was required. It was, therefore, reasonable for FWA to go ahead with deregistering the Aircraft from the CAAV even if there was a risk that the Vietnamese authorities would go on to require an ECOA be obtained, because it had no other reasonable route open to it.[219]Fourth, VietJet pointed out that Mr Creaven was considering, in October to November 2022, the possibility of a ferry flight to Clark airport in the Philippines prior to deregistration, which Mr Creaven’s flowcharts from the time suggested could be quicker than deregistration in Vietnam. That was not an option Mr Creaven pursued, perhaps not surprisingly, given that it would have required them to be flown out of Vietnam whilst on the Vietnamese register and therefore FWA would not have been able to direct the maintenance and any repair required. As noted, at least three of the Aircraft were not airworthy and, even without such a problem, a return to service work-pack would in any event have been required. Time periods for what would have been required were not certain; for example, fixing the fuel leak on MSN 8906, as Mr Creaven confirmed in cross-examination, would have been dependent upon finding the required time in a hangar for the work to be carried out. Undertaking work on the Aircraft to get them ready to fly would, if they were still on the Vietnamese register, have likely required VietJet’s cooperation which Mr Creaven had no reason to think would be supplied (indeed, as noted above, VietJet had said they would not assist with maintenance after the redelivery date). The fact that Mr Creaven noted this as one of a number of options before redelivery does not suggest it was unreasonable of him not to take it forward.[220]Fifth, VietJet contended that FWA delayed in appointing a customs broker to assist with the export of the Aircraft because FWA only appointed a customs broker on 27 February 2024, nearly 2 months after the VCA had told FWA’s lawyers, T&G Law Firm, that foreign owners must carry out customs procedures through a local broker/agent. However, this goes nowhere. Airimex were the agents appointed, who had been working with FWA on various customs issues, including import of parts for the Aircraft, for some time before this. Mr Creaven’s evidence (which I accept) was that he always knew that a local customs agent would be required for export of the Aircraft, but that Airimex were only given the formal instruction at this point because they would have to be able to demonstrate they were representing the Aircraft’s owner. There is nothing to suggest that any earlier instruction would have led to anything moving more speedily.[221]A further matter raised by VietJet in the context of the attempts to export the Aircraft was that FWA had sought to engage the assistance of the Australian and UK embassies in Hanoi, seeking their assistance with the Vietnamese authorities with the aim of persuading the authorities that an ECOA should not be required. This does not seem to me to take things any further either way. It does not appear to have borne fruit.[222]Lastly, in relation to the Engine 771335, as noted above, FWA wrote to Eagle Services on 9 September 2022 informing them about the legal dispute and asking Eagle Services to confirm they would not take any further instructions from VietJet, or return the engine to VietJet. It is likely that, in response to that letter Eagle Services would have stopped any work they were doing on the engine (despite Mr Creaven’s evidence that FWA did not intend that to happen) although it appears that, due to the backlog in work on this type of Pratt & Whitney engine at the time, work had not yet commenced on it.[223]The engine was not, in fact, inducted by Eagle Services until June 2024 (the fixed price agreement for the work on the engine having been signed on 21 March 2024), and the work on it was not completed until February 2025. VietJet contended that this delay was unexplained by FWA, saying that although in December 2022 FWA appeared to have considered the shop visit a high priority, and seemed to be pressing for an early induction, by mid-February 2023 the likely induction date had slipped to June. VietJet pointed out that whilst Mr Creaven said in his witness statement that he had made several requests for an induction, there were no documents containing those requests. VietJet contended that if the engine had been repaired more quickly, the costs claimed in relation to it, and in relation to MSN 8937 more generally, would have been lower, including because if the contract for the work had been signed sooner, it is likely the price agreed would have been lower (as a result of inflation) and because of the cost associated with MSN 8937 being kept in Vietnam for as long as it was would have been less.[224]However, it is difficult to see what other options were available to FWA. FWA did not know the scope of VietJet’s contract with Eagle Services, and could not have the engine serviced under, or control, VietJet’s contract with Eagle Services without VietJet’s co-operation, which (as I have said above) it was reasonable to think would not be given, in particular in September 2022 (when Mr Siganto wrote his letter to Eagle Services referred to above), or at least would allow VietJet to cause considerable problems for FWA. It was entirely reasonable of FWA to want to control that process. Moreover, there is no reason to doubt Mr Creaven’s evidence that he made several requests for the engine to be inducted, despite those not being contained in documents, in circumstances where it was clearly in FWA’s interests to get the engine inducted sooner rather than later. In any event, and importantly, there was no evidence that any specific service slot was in fact lost due to FWA writing its 9 September 2022 letter, or in wanting to have its own contract with Eagle Services. The slippages in dates were not specifically explained, but are consistent with the fact that there was over this period a global backlog in relation to work being done on these types of engines in the Pratt & Whitney service network.[225]The result is that there was nothing in FWA’s conduct which means that the causation requirements for the clause 23.1 indemnity were not fulfilled up until each of the Aircraft were exported from Vietnam.[226]The only point made by VietJet in its written closing about the period post-export, was a general one that FWA should have marketed the Aircraft whilst they were undergoing maintenance such that they would have been ready to re-lease immediately upon export, with the allowance that they would be marketed and dealt with in pairs. It was therefore contended that if (as VietJet contended, but I have rejected, should have happened) MSN 8937 had been exported by around October 2023, the NEOs could have been on lease by the end of that year. If there was any merit in that point, it would have made no material difference in respect of the NEOs (in light of my findings above concerning the period pre-export), given that MSN 8937 left Vietnam on 13 March 2025, and the cut-off date for the claims was in any event 22 May 2025. There may have been some merit in an argument that the period of recovery for the CEOs (which left Vietnam in October 2024) should have been truncated by a few months but as I have held (as set out in the various sections below) that FWA is not entitled to recover in its claims for costs and lost rent in respect of the CEOs, and in the absence of focused submissions from either party on this point, I do not seek to identify with any precision by how much. The effect of VietJet’s alleged interference[227]FWA also relied on what it alleged was VietJet’s positive interference with FWA’s attempts to export the Aircraft in order to explain the delays. There were really three aspects to this: i) The Shareholder Proceedings. ii) The correspondence from VietJet to the CAAV, VCA and other government bodies/ministries in September and October 2023. iii) The application by Mango in April 2024 for a court-ordered inspection of the Aircraft.[228]Many of the details relating to these matters were set out in Judgment 1 by Picken J. There was a dispute before me as to the status of Picken J’s findings in that respect, with VietJet saying that no issue estoppel arose from those findings such that I was not bound by them. Those findings were made in the context of considering whether Picken J might exercise an equitable jurisdiction to grant VietJet relief from forfeiture, which he declined to do, and his finding in relation to VietJet’s conduct in relation to the Shareholder Proceedings was only one of six factors he took into account. VietJet contended, therefore, that his findings in relation to the Shareholder Proceedings was not fundamental to his decision, and cannot be the subject of an issue estoppel. In support of that, VietJet relied upon Spencer Bower and Handley: Res Judicata (6th ed., 2024) at paragraph 8.25, which discusses situations in which a decision will not give rise to an issue estoppel (omitting internal footnote references):
“The same principle applies where the court finds alternative grounds in favour of the successful party. Those findings do not create issue estoppels because the losing party could not effectively appeal against any of them separately, and if one was upheld the appeal would fail. There may be a cause of action estoppel or merger but no issue estoppel because no single finding could be ‘legally indispensable to the conclusion’ or the ‘essential foundation or groundwork of the judgment, decree, or order’ as Dixon J said in Blair v Curran …”
[229]This led to a dispute between the parties whether such a principle was applicable to Picken J’s decision on this issue, which was part of what FWA described as a multifactorial decision and exercise of his discretion. VietJet argued that made no difference, given Picken J had stated that his findings about VietJet’s conduct was one of six factors which “separately and cumulatively” informed his decision to refuse to exercise his discretion to grant relief from forfeiture. In other words, contended VietJet, he would have come to the same view on relief from forfeiture regardless of his view on VietJet’s conduct in relation to these particular matters, such that his findings about that conduct were not fundamental or necessary to his decision, and therefore cannot be the subject of issue estoppel as a matter of law.[230]This is not necessarily a straightforward matter, and I note that Spencer Bower recognises (at fn 5 to paragraph 8.25, by reference to the text: “Those findings do not create issue estoppels because the losing party could not effectively appeal against any of them separately”) that the correctness of the proposition was left open in The Good Challenger [2003] EWCA Civ 1668; [2004] 1 Lloyd’s Rep 67. There was no developed argument before me on that point.[231]However, the question whether or not an issue estoppel can arise in relation to the findings of Picken J in relation to VietJet’s conduct is, in fact, something of a red herring. First, the same evidence was available at this trial as it was in the earlier trials (save that Picken J heard relevant oral evidence live in court at the first trial), and VietJet made no attempt to explain at this trial by reference to the evidence why Picken J’s findings were wrong. Insofar as I was shown evidence bearing on these matters, it was consistent with his findings and his conclusions appeared to be entirely correct. There was no attempt by VietJet to advance any other evidence at the trial before me to deal with those factual issues, or in argument any attempt to suggest that different factual conclusions should be drawn. In relation to VietJet being behind the Shareholder Proceedings (as Picken J found that they were), Mr Thompson said in his oral opening submissions that he would not be inviting me to reassess the evidence on that point. In relation to the correspondence from VietJet to the CAAV, VCA and other government bodies/ministries in September and October 2023, that speaks for itself – it was clearly asserting a different position to that which had been adopted in the other correspondence (provided to FWA) sent pursuant to the Consent Order, and was clearly intended to disrupt FWA’s attempts to export the Aircraft (for example, in its letter to the Ministry of Transport on 10 October 2023, characterising it as an illegal export).[232]Other points were put to Mr Creaven and submissions made, such that on certain matters and at certain times VietJet had been co-operative, and that Mr Creaven had not, at the time, seen evidence that VietJet was seeking to interfere with the export process, but that does not deal with the matters referred to above or that Picken J dealt with. They may well have been co-operative (or at least appearing to be co-operative) in some respects, whilst still seeking to interfere by way of the court processes and correspondence with authorities in the manner alleged.[233]However, second, and in any event, the issue before me is different to the matter that Picken J determined in Judgment 1 not just in terms of the overall issue (there, relief from forfeiture), but also because Picken J’s findings focused on VietJet’s conduct and what it was seeking to do, not what the effect or consequence of that conduct was. He did not make findings on whether VietJet’s attempts to interfere with the export of the Aircraft had been successful, or what role FWA’s conduct had (if any) on the delay to their export. In fact, disclosure of matters relating to FWA’s conduct that VietJet contends are now relevant to this point had largely not been given at the stage when Picken J was considering it. The question what impact VietJet’s conduct (as found by Picken J) had remains open, and indeed needs to be assessed in light of what FWA did and the other facts that are now apparent.[234]In relation to the Shareholder Proceedings, and the injunctions obtained in those proceedings that were in force from 23 February to 4 April 2023, it appears that they had no material impact on the progress of the export of the Aircraft. By 4 April 2023, the first of the Aircraft (MSN 8577) had not yet been inducted into the VAECO hangar for its required maintenance, but that was nothing to do with the existence of those proceedings (rather it was to do with lack of hangar space). Indeed, Mr Creaven accepted in his oral evidence that the injunctions had no impact on the work that needed to be done on the Aircraft.[235]FWA suggested that it was not just the period for which the injunctions that were in force that need to be considered, but also the fact that the underlying proceedings (seeking to reverse de-registration) “continued to hang over the CAAV” for the whole duration of the period FWA was attempting to export the Aircraft. However, there was no evidence that any such “hanging over” caused the CAAV to act any differently from how they otherwise would have acted.[236]There is also no evidence that the correspondence written by VietJet to the CAAV, the VCA and the government in September and October 2023 had any (or any material) impact on the timetable for export. There is nothing to suggest that VietJet’s letters caused the VCA to take the view that it did (namely, that an ECOA was required for customs clearance to be given to export the Aircraft), or that without that correspondence it would have acted differently. FWA said in its written closing submissions that, by this correspondence, VietJet were “looking to obstruct” FWA’s export of the Aircraft (as found by Picken J at paragraphs 386-387 of Judgment 1). However, that only goes as far as it goes – it says nothing about what the effect of the correspondence was.[237]As to the application by Mango in April 2024 for a court-ordered inspection of the Aircraft, this appears particularly to relate to MSN 8906, which was the Aircraft FWA were on the verge of exporting at that time. The effect of the court order on the process for the export of MSN 8906 was far from clear: i) After Mango had submitted its request to the Court for an inspection of the Aircraft on 4 April 2024, the Hanoi Court issued a decision on 15 April 2024 requesting the Ho Chi Minh City Court to carry out an inspection of the NEO Aircraft. (I note that 15 April 2024 was also the day on which the CAAV issued an ECOA in relation to MSN 8906 containing the exception statement, before which Mr Creaven explained that the CAAV had been waiting for a formal request from the VCA for an ECOA). ii) Picken J recorded (at paragraph 90 of Judgment 1) that the practical effect of the on-site inspection orders was to ground the Aircraft pending their completion, although I note that Mr Creaven’s evidence in his third statement was that MSN 8906 took local flights (Ho Chi Minh City to Ho Chi Minh City) to ensure it was maintained in flight ready condition on 21 April, 26 April and 26 May. iii) There was no evidence as to whether the Ho Chi Minh City Court acceded to the request from the Hanoi court or whether it carried out such an inspection, or if so when (or what consequences followed in terms of the court proceedings). iv) Mr Creaven’s evidence was that on 20 May 2024, FWA was advised that the Ministry of Finance had agreed to instruct the VCA to proceed in respect of MSN 8906. v) MSN 8906 was inspected by the VCA on 4 June 2024, and customs clearance was issued on the same day.[238]There is no evidence on which to conclude that the request made by the Hanoi Court on 15 April 2024 contributed to the delay to the export of the Aircraft. There is no evidence as to whether any such court-ordered inspection actually took place, or when. The export appears finally to have taken place because of the Ministry of Finance’s instruction (on 20 May) to the VCA to proceed, which the VCA then did on 4 June – there was no evidence or explanation how that interacted with the court’s request for an inspection. As a result, I cannot conclude that Mango’s application materially delayed the export of MSN 8906.[239]I cannot therefore say that any of the alleged conduct by or at the behest of VietJet materially contributed to the delays to the export of the Aircraft, although they may have done, and in any event they undoubtedly clouded the picture and demonstrated a desire to obstruct the process. However, this is all largely an irrelevant sideshow. The indemnities were not triggered by, and the claims were not brought on the basis of, VietJet’s alleged obstruction of the export process.[240]What does appear from the detail of the chronology is that the fact that it took FWA so long to export the Aircraft is not that surprising, and is no reason by itself to suggest that FWA must have acted unreasonably. The position was that the Vietnamese authorities faced an unprecedented situation in relation to the export of these Aircraft, which appeared to be the first occasion on which they had had to deal with an export application by an applicant other than a Vietnamese airline and under an IDERA. VietJet sought to take advantage of that situation by, on the one hand taking a position (compliant with the Consent Order) in correspondence with the Vietnamese authorities consenting to FWA’s export of the Aircraft, whilst, on the other hand, in correspondence which was only produced to FWA and the English court some time later, lobbying the same authorities suggesting that FWA’s export was illegal. At the same time, it sought to challenge (through its shareholders acting as proxies) the CAAV’s decision to de-register the Aircraft through court proceedings. Whether or not VietJet’s attempts to interfere materially contributed to the processes, it is entirely unsurprising, in those circumstances, that the Vietnamese authorities took their time to give approval to the course of action FWA was seeking, even when the Aircraft were in flight ready condition.[241]To the extent that VietJet also sought to contend that, even if FWA could not be criticised in its conduct as a source of delay in the export of the Aircraft, the delays can be put down to the actions of the Vietnamese authorities, that does not assist VietJet, at least insofar as its liability arises under clause 23.1 which does not require a link between Losses and the conduct of the Sub-Lessee. Clause 23.1 ensures that a Sub-Lessor is indemnified and held harmless for Losses arising as a result of delays to export caused by a stance taken by the authorities in the country of export and, indeed, that is no doubt one of the purposes of the inclusion of the indemnity in the agreement. The claims on the indemnities in light of the above[242]Having set out what took place over this period, and considered the particular points raised by the parties in relation to certain matters that took place, it is necessary to ask how these points fit in to the analysis relating to the recovery of loss under the indemnities. It was at one point suggested by VietJet that FWA’s conduct in this period was such as to fall within clause 23.2(c) (dealing with gross negligence) such that the clause 23.1 indemnity was not open to it. However, as I have noted elsewhere that point was not pursued in closing submissions and it was made clear that VietJet no longer relied upon it.[243]However, the points made were said by VietJet nonetheless to be relevant to causation and remoteness.[244]I have dealt above with the legal test relating to causation, and rejected VietJet’s case that it required a proximate cause connection, against which most of VietJet’s submissions on the facts were calibrated. However, the clause 23.1 indemnity permitted a looser causal connection than that. FWA is entitled to be indemnified by VietJet for its Losses, whenever arising, relating to, arising out of or resulting from (whether directly or indirectly) export, re-registration and de-registration (among other things) of the Aircraft. Given the conclusions I have reached above, the points made by VietJet on the facts relating to delay do not suggest that the losses claimed do not so arise, relate or result. They clearly do.[245]It was not clear whether VietJet were contending that, even if they lost on their construction argument relating to the necessary causative link, recovery under the indemnity required FWA to have acted reasonably and/or as a competent aircraft lessor. However, even if it did, it is clear from the points relating to the facts that I have dealt with above, and my rejection of VietJet’s various criticisms of FWA’s conduct, that FWA did so act.[246]In relation to remoteness of loss, VietJet did not contend at the trial that there was any remoteness limitation in relation to the clause 23.1 indemnity. The point was only made in relation to the clause 23.7 indemnity, which was triggered by a breach of contract, and it was as I have already noted conceded by FWA that there was a remoteness requirement relating to that indemnity. It does not appear that any losses claimed under clause 23.7 were not also claimed, and would not also be recoverable, under clause 23.1, such that whether any of the losses were too remote under clause 23.7 will not have an impact on the ultimate outcome.[247]However, in any event, on the facts as I have found them to be above, the losses claimed arising from delays to the export of the Aircraft cannot be said to have been too remote to be recoverable. The delays were the result of the condition of the Aircraft on redelivery, the difficulties in communicating with and getting appropriate decisions out of the CAAV and the VCA, the fact that FWA needed to deregister the Aircraft from the CAAV in order to give work orders, the state of the queue for service of the Pratt & Whitney engine, and the Vietnamese court proceedings. These were all the sorts of matters that were within the reasonable contemplation of the parties. Claims to put the NEOs in the Return Condition[248]It was agreed that the NEOs were not in the Return Condition when they were redelivered to FWA, and it was accepted by VietJet that FWA could bring a claim under the indemnity in clause 20.4, or alternatively a claim in damages, in respect of the failure to redeliver the NEOs in the Return Condition. However, there were issues as to: There was at one point an issue as to whether FWA was entitled to sums claimed under the indemnity for costs incurred after the sale of the Aircraft to the “Trustee Owners” in January 2022. However, this appeared to be conceded by VietJet in its skeleton for trial, where it accepted it was liable under clause 20.4 and separately noted that the paragraphs in FWA’s skeleton dealing with what was said to be the relevant paragraph in the Defence fell away. No detailed submissions were thereafter addressed to the point. In any event, VietJet was liable to such sums, given FWA’s acquisition of the Excluded Property (see also paragraph ‎109 above). i) The proper construction of the indemnity in clause 20.4. ii) What it would cost to put the NEOs into the Return Condition. iii) The difference in the value of the NEOs in the Return Condition and in the condition in which they were redelivered (which is relevant to the alternative way in which the claim is put).[249]The context in which these points arise is: i) FWA incurred costs in relation to the condition of the NEO Aircraft which, in principle (and subject to reasonableness), VietJet accepts fall within the scope of the indemnity. These costs resulted in the Aircraft being in a better condition than they had been on redelivery, but were not sufficient to put the Aircraft into the Return Condition. Some of these costs are dealt with under FCAS claim 7, others are dealt with in this section below. Together they amounted to approximately $8.7m for the two NEO Aircraft. ii) The NEO Aircraft were leased, in that condition, to Turkish Airlines (i.e. not in the Return Condition). iii) FWA claims, in total, approximately $31.6 million under this indemnity, for the costs that it contended it would incur to put the Aircraft into the Return Condition if it had chosen to do so. That is obviously a far greater sum than it has actually spent on the Aircraft. iv) In the alternative, FWA claims the difference in value between the NEO Aircraft in the Return Condition and as they were on redelivery. This was the subject of expert evidence on aircraft valuation. FWA’s claim on this basis is for approximately $15.16 million. Construction of the clause 20.4 indemnity[250]The relevant part of clause 20.4 provides as follows: “The Sub-Lessor may … elect … to accept redelivery of the Aircraft notwithstanding non-compliance with Clause 20.1 (Return of Airframe and Engines) or the Return Conditions, in which case the Sub-Lessee will indemnify the Sub-Lessor in respect of the cost (as reasonably determined by the Sub-Lessor following consultation with the Sub-Lessee) of putting the Aircraft into the condition required by this Agreement.” [underlining added][251]VietJet contends that, under that indemnity, FWA is entitled to claim for(a) costs that it had actually incurred and(b) which had been reasonably incurred and were reasonable in amount. The indemnity did not, VietJet contends, cover hypothetical costs of putting the Aircraft into the Return Condition where FWA had not incurred those costs, still less where it would not incur them and where it would be entirely uncommercial to incur them.[252]FWA contends that the indemnity did cover such costs, and that it could claim for the cost of putting the Aircraft into the Return Condition, even where it had not done so and did not intend to do so. In support of its position, FWA points out that clause 20.4 does not include language similar to the language to be found in other indemnities in the sub-leases referring to Losses “suffered or incurred by” the Sub-Lessor. FWA also contends that the reference to reasonableness in clause 20.4 refers to the Sub-Lessor’s determination of the costs of complying with the requirements, but does not alter the requirements themselves or contemplate that the Aircraft should be restored to some lesser standard.[253]VietJet says that clause 20.4 only operates to indemnify FWA where it has actually spent money or incurred a loss which, it contends, is the case as a matter of authority and of construction of the words of this clause. It also contends that, even if that is wrong, in order to recover under the indemnity FWA must show that(a) it does intend to perform the work and(b) that performing the work would be reasonable.[254]This point is important in circumstances where FWA has performed certain works on the NEO Aircraft, and has now re-leased them (to Turkish Airlines) without carrying out additional work to put them into the Return Condition. Mr Creaven confirmed in his oral evidence that he never intended to put them fully into the Return Condition.[255]VietJet relied upon what was said in respect of indemnities by Leggatt LJ (sitting at first instance) in Al Nehayan v Kent [2018] EWHC 333 (Comm); [2018] 1 CLC 216 at paragraph 108:
“In English law a promise of indemnity is a promise to prevent someone from suffering a loss. Thus, no obligation to pay arises unless and until a loss is suffered. At that point the indemnifier is in breach of contract for failing to hold the indemnified person harmless against the relevant loss and is liable in damages: see Firma C-Trade SA v Newcastle P&I Association (The Fanti and the Padre Island) [1991] 2 AC 1, 35-6 (Lord Goff). Although at common law nothing less than payment would suffice to prove loss, under equitable doctrine which prevails over the common law it is sufficient (in the absence of an express condition of prior payment) to show that the indemnified person has incurred a liability the existence and amount of which have been established by agreement or by a court judgment or arbitration award: see e.g. Bradley v Eagle Star Insurance Co Ltd [1989] AC 957 (applying this principle in the context of liability insurance).”
[256]VietJet relied on this statement (as well as the passage from The Fanti and the Padre Island [1991] 2 AC 1 at 35G-36C (Lord Goff)) to contend that a contract under which A promises to indemnify B will only operate where B has actually spent money or incurred a loss (which may be satisfied by proving an established liability in an identified amount).[257]VietJet also relied upon the Court of Appeal’s decision in Jervis v Harris [1996] Ch 195, where the Court was dealing with a clause in a lease which provided that if the tenant failed to make good all want of repair of which he had been given notice, the landlords may do the work themselves and recover the costs and expenses of the work from the tenant on demand. VietJet relied upon what Millet LJ said at 204B:
“The landlord's claim to reimbursement is not triggered by the tenant's breach of covenant but by his own expenditure on carrying out repairs. The fact that the property is in disrepair is not enough. The landlord must have carried out work to remedy the want of repair; …”
[258]However, the clause itself was not set out in the judgment, such that there is little to be gained in terms of assistance on construction. It does not appear that what it provided for was controversial. Millet LJ simply described its effect at 201F-G. Whilst the clause itself was not set out, the previous first instance decision which Jervis v Harris approved - Hamilton v Martell Securities [1984] 1 Ch 266 - at 273A, did set out the clause before it in that case, which made it clear that the scheme was that the lessor could elect to make the repairs and the expense was to be “repaid” by the lessee to the lessor on demand. It does not appear to have been an issue whether the landlords could have recovered costs or expenditure they had not (yet) incurred.[259]FWA relied on insurance cases stating that an indemnitee may recover an indemnity based on the cost of reinstatement of property even though reinstatement is never effected e.g. Manchikalapati v Zurich Insurance plc (2019) 187 Con LR 62 (in particular paragraphs 96-99). That is so, but it is not a legal principle that will always be the case for every type of contract, much as it is not a legal principle that it can never be the case. The scope of the indemnity depends upon the correct construction of the contractual provision in question.[260]FWA cited the judgment of Jefford J in Hodgson v National House Building Council [2018] EWHC 2226 (TCC), where the Judge addressed a submission that the claim should be struck out because the claimant had sold the property and could not now undertake any remedial works, and relied in particular on the following passage (with particular emphasis on the first part of (iv)):
“ … the issue between the parties is what the NHBC is now liable to pay under the Policy. There seem to me to be numerous issues that potentially arise, the end result of which is that the “no loss” defence is not one suitable for determination on a summary basis: (i) firstly, an insurance policy may indemnify the insured against loss. Under such a policy it is a question of law and fact what loss has been suffered. The policy may by express inclusion or exclusion identify how loss is to be assessed. (ii) There is no decided authority that where the claim is in respects of defects in or damage to property, such loss cannot include the cost of remedial works if the remedial works will not be carried out. The views expressed in the Great Lakes case are obiter and at odds with the views expressed in a leading textbook. (iii) That conflict of view is perhaps understandable if one sees the cost of remedial works as one measure of loss. In such cases, if the remedial works are never to be carried out or are wholly disproportionate, the court may regard the cost of remedial works as an inappropriate measure. That is likely to be a quest ion of fact and degree not suitable for determination on a summary basis. (iv) In any case, the distinguishing feature here is that the Policy does not provide for the NHBC to indemnify against loss – rather it requires the NHBC to pay the Cost as defined. In that sense, it may be distinguished from the policy in the Great Lakes case in which the operative insuring provision insured against loss and the reinstatement clause provided the basis on which the amount payable was to be calculated. For the reasons I have already given, it is certainly arguable that the issue in this case is not the appropriate measure of loss but what the NHBC has undertaken to pay in accordance with the definition of Cost.”
[261]That does not seem to me to take things much further. It was a decision on a strike out, simply deciding whether the point was arguable, noting that (when concerned with measure of loss) the facts may be important, and in (iv) emphasising that it all depends on the wording of the relevant clause. That final point is important. The authorities cited by the parties do not themselves provide the answer, but rather it ultimately turns on the proper construction of this indemnity in the context of this contract.[262]On that, I consider VietJet is correct. That is principally for the following reasons: i) There is some weight to be placed on the fact that the clause uses the word “indemnify” rather than (for example) “pay”. The building cases relied upon by FWA largely concerned clauses requiring a party to “pay” e.g. “the Cost” as defined (e.g. Hodgson v NHBC) or “the reasonable cost of rectifying or repairing the physical damage …” (in Zagora Management v Zurich Insurance [2019] EWHC 140 (TCC)). In general, no obligation to indemnify arises unless and until a loss is suffered (the question of when the obligation arises in relation to third party liabilities does not arise in the context of this clause), and the use of the word here suggests some connection between the indemnified party’s outgoing costs and the incoming indemnity. ii) The Return Conditions are very exacting, and require the Aircraft to be put back into, what Mr Thompson not unfairly described as, “pristine” condition. That included not only the engine and other mechanical parts of the plane, but also items such as the internal furnishings and the overhead lockers, even if they were fully functioning with no defect or damage. This included items such as overhead lockers, the interior panels, galley flooring, carpets, curtains, seat covers, seat foams, galley equipment, cargo side walls and ceiling panels. Mr Creaven accepted that the replacement of those items, if they were in a good state, would “certainly not [be] normal” (the normal course would be to overhaul, rather than replace) and to replace all of these items would be “completely uncommercial”. The replacement of such items would not, it was agreed between the experts, add any value to this sort of Aircraft. For other parts, Mr Bull accepted that it would not be normal to replace every life limited part, whether needed or not, and that generally it would not make sense to replace serviceable aircraft parts because there would be no corresponding premium for a future lessee or purchaser. If, for any reason, the Sub-Lessor chose to replace those items, it was entitled to do so because that was part of the Return Condition, and could recover the cost of doing so from the Sub-Lessee. That was the deal that was struck. However, if the Sub-Lessor chose not to do so (like FWA here), and never had any intention of doing so, it is difficult to see why the parties would have intended that the Sub-Lessor should nonetheless be able to recover the (hypothetical) costs of doing so from the Sub-Lessee. It would be a complete windfall for the Sub-Lessor. iii) The inclusion of the stringent provisions in relation to the Return Condition are part of the JOLCO arrangement which, as noted elsewhere, seeks to provide a disincentive to the Sub-Lessor to return the Aircraft. It deliberately makes it financially disadvantageous to the airline not to exercise its option to purchase. That, and similar points arising from the context of the JOLCO structure, supported the conclusions reached by Picken J on matters he determined in Judgments 1 and 2 and also support some of the matters I have determined elsewhere in this judgment. However, there is only so far that point can be pushed. It does not seem to me that it can be used to support every construction favourable to FWA even where its consequences appear otherwise commercially unreasonable. Moreover, the disincentive exists in any event, because when its takes the decision not to exercise the option, VietJet knows (if VietJet does not itself put the Aircraft into the Return Condition) that FWA may do the work and claim the cost from VietJet, such that VietJet knows it is at risk of having to pay the cost of putting the Aircraft into the Return Condition. iv) Moreover, FWA clearly has sufficient protection under the JOLCO scheme without its construction of this particular clause succeeding. Under the sub-leases, VietJet’s primary obligation is to return the Aircraft in the Return Condition. If it fails to do so, FWA has two options: it can either(i) refuse to accept the redelivery of the Aircraft until VietJet performs the works (and enjoy liquidated damages calculated at 150% of the Rental in the meantime); or(ii) take redelivery of the Aircraft, perform the works itself, and charge VietJet the costs of doing so. Both parties agree that if and to the extent that FWA does not carry out the work to put the Aircraft into the Return Condition, it has, in any event, a claim (whether under the indemnity or as a claim for damages for breach of contract) to the diminution in value between the Aircraft in the Return Condition and in the condition it was at redelivery (and no doubt if it regarded the diminution in value measure as inadequate, it would undertake the work itself and claim the cost). So there is no doubt that it will be made good one way or another. v) The windfall is perhaps best illustrated by a scenario where the Sub-Lessor repossesses the Aircraft, does not put it into the Return Condition, and sells it (obviously at a lower price than a new, or “pristine”, aircraft would command). The diminution in value claim that both parties accept can be brought would make the Sub-Lessor good for any loss arising from the lower sale price. It is difficult to see why the parties would have intended the Sub-Lessor in those circumstances to be entitled to payment from the Sub-Lessee of any additional amount represented by the costs of putting the Aircraft into the Return Condition (over and above the amount of the diminution in value). There would be no commercial purpose to such a payment, which would simply serve to punish the Sub-Lessee. That is not the factual circumstance here, because the NEOs were leased, not sold (which was no doubt a decision FWA took in its commercial interests), but the fact that FWA’s construction of the indemnity would lead to that outcome in those circumstances suggests it cannot have been what the parties intended. vi) FWA rely on the fact that the language of clause 20.4 does not refer to Losses “suffered or incurred” by the Sub-Lessor, in contrast to other of the indemnities in the sub-lease. That does not seem to me to be a weighty point. This clause is specifically worded to deal with the particular situation arising when the Aircraft has been redelivered other than in the Return Condition and deals only with the costs of putting it into the Return Condition, such that the absence of certain forms of words that appear in more general indemnities does not indicate either way what meaning was intended in clause 20.4. It is right that inclusion of other words might have made the clause clearer, but that is almost invariably the case when considering a question of construction, and the same could be said against FWA’s construction. vii) FWA also seeks to support its construction because it says the Sub-Lessor is exposed to liability for breach of its own redelivery obligations under the head lease. However, that takes things no further. The head lease contains an identical clause, such that there would be no payments required under it unless the Lessor did the work, in which case the indemnity could be claimed against the Lessee under the head lease and, in turn, the Sub-Lessee. Moreover, if the Sub-Lessor was concerned about the position, it could perform the work to put the Aircraft into the Return Condition (to fulfil its obligations under the head lease) and claim the indemnity from the Sub-Lessee under clause 20.4. viii) FWA also contended that VietJet’s proposed construction would diminish the purpose of the Return Condition, which was said to protect the equity investors against value volatility risk and improve their chances of selling the aircraft quickly and at a reasonable price. However, that does not address the fact that the Sub-Lessor is entitled to put the Aircraft into the Return Condition and claim the cost of doing so from the Sub-Lessee, such that if the Sub-Lessor wants to, it can have the Aircraft in the Return Condition. What protection of the interests referred to does not require, however, is the Sub-Lessor being paid the cost of putting the Aircraft in the Return Condition and then selling (or leasing) it without in fact doing that work. VietJet’s construction of the indemnity does not mean that the Sub-Lessor is being required to keep the Aircraft in a non-Return Condition and to suffer for it – the Sub-Lessor can carry the work and the Sub-Lessee would then have to pay for it. ix) FWA suggested that, if (as has happened with the NEO Aircraft) they are after redelivery then not sold, but leased, the Lessor suffers because it would have to accept increased liability for financial contributions to future maintenance during the life of the subsequent lease, and the future lessee would be entitled to return the non-compliant components in the same condition on redelivery. However, as noted already, the Lessor can avoid that situation if it wants by itself putting the Aircraft into the Return Condition and receiving the cost of the work from the Lessee. But, even if it does not, it is in any event entitled to the diminution in value which would reflect the various costs associated with owning an older aircraft rather than a new one, including liability for financial contribution to maintenance and the fact that when the aircraft is returned, it will have components in the same condition as on redelivery from the Sub-Lessee. x) FWA also contended that the obligation to indemnify under clause 20.4 arises when the Sub-Lessor elects to accept redelivery of the Aircraft, such that any determination by the Sub-Lessor as to the reasonable cost of putting the Aircraft into the Return Condition will take place before the Sub-Lessor has had the opportunity to undertake the works. However, the premise of that argument assumes FWA are correct in their construction. On VietJet’s construction, the obligation to indemnify under clause 20.4 only arises when the cost has been incurred. The reasonable determination might take place before or after the cost had been incurred, and what it includes is a reasonable determination that the incurring of the particular costs is reasonable in order to put the Aircraft into the Return Condition. The Sub-Lessor can replace the overhead lockers if it wants to, but at a cost which is reasonable – it does not have carte blanche to spend what it likes.[263]Accordingly, on the proper construction of clause 20.4, VietJet was right to say that FWA is entitled to claim only for costs that it had actually incurred.[264]There was no dispute between the parties that, to fall within the scope of the indemnity, the costs had to be reasonable, in the sense that the sums spent had to be reasonable given the task undertaken (rather than including any assessment of the reasonableness of the work done or of undertaking the task at all). VietJet sought to go further, and contended in addition that incurred costs claimed under clause 20.4 had to have been reasonably incurred, such that a sum which FWA had incurred in performing works that did not affect the value of the Aircraft would not fall within the terms of the indemnity, as it could not be a sum that had been “reasonably determined” by FWA. I do not accept that. FWA was entitled to put the Aircraft into the Return Condition, even if (for example) a particular aspect of the work required would not have affected the value of the Aircraft. The part of clause 20.4 dealing with FWA’s reasonable determination referred to the cost of doing the work that was required to put the Aircraft into the Return Condition – in other words it goes to the cost of the works, not the content of the works. Thus, even if it may be considered unreasonable to replace all the overhead lockers, that is what is required by the Return Condition, and that is what the clause says the Sub-Lessor can do, and can claim the (reasonable) cost of doing so from the Sub-Lessee.[265]VietJet sought to pray in aid of its argument on this point cases concerned with the appropriate measure of damages in a claim for breach of contract, such as Ruxley Electronics and Construction v Forsyth [1996] AC 344 and, in the context of an aircraft lease, Sunrock Aircraft Corp Ltd v SAS [2007] 2 Lloyd’s Rep 612. However, here the issue is not one of the appropriate measure of damages for a breach of contract, but of the proper construction of this particular indemnity clause and here, as I have said, the clause not only requires VietJet to put the Aircraft into the Return Condition, but also, if VietJet does not do so, entitles FWA to do so and to recover the costs of so doing from VietJet. It does not have to show that putting the Aircraft into the Return Condition was a reasonable thing to do. Another case relied upon by VietJet, FTAI AirOpCo UK v Olympus Airways [2022] EWHC 1362 (Comm), also takes matters no further. Whilst that was a claim under an indemnity on the return of an aircraft from a lease, where there was an obligation to put the Aircraft into a specific return condition, the indemnities were differently worded (see paragraph 47 of the judgment) and there the claimant did not claim the cost of putting the aircraft into the specified return condition, but only the diminution in value (see paragraph 17). As a result, none of those authorities affects my conclusion that the indemnity clause only allows recovery of costs actually incurred in putting the Aircraft in the Return Condition (subject to the amount of the costs being reasonable). The claim for costs under the clause 20.4 indemnity[266]Given my conclusion on the main question of construction, above, the amount FWA can claim under the clause 20.4 indemnity in terms of costs of putting the NEO Aircraft into the Return Condition is relatively limited. By far the greater part of the claim under this head was for costs that had not been incurred. Costs incurred[267]The costs that were actually incurred were in part not controversial. VietJet accepted that there were costs claimed under FCAS claim 4 amounting to $371,859 for the two NEO Aircraft that had been incurred and could be claimed.[268]There were also other claims relating to repair of the NEO Aircraft and putting them into an airworthy condition that were claimed by FWA under FCAS claim 7 (“Return of the Aircraft to flight ready condition and ongoing maintenance”) which VietJet accepted in principle could be claimed, subject to the other points that generally related to reasonableness of the costs involved. I deal with those costs below under the heading dealing with FCAS claim 7. Where some of the sums claimed under FCAS claim 9 are also dealt with, some of which are also alternative to the diminution in value claim, as having contributed to the improvement in the NEO Aircraft’s condition post redelivery. Those costs, as having contributed to the improvement in the NEO Aircraft’s condition post redelivery, are (like the costs claimed under FCAS claim 4) alternative to the diminution in value claim.[269]In addition, there were also costs claimed under FCAS claim 4 that had actually been incurred in relation to engine 771335 (for MSN 8937) that had been through its shop visit at Eagle Services. FWA sought recovery of the cost it had incurred subject to some adjustments.[270]The total engine shop visit cost that was charged, inclusive of LLPs, was $5,327,503.87. The adjustments made by FWA for the purposes of its claim were(i) a credit of $200,000 given by Eagle Services was added back on to the invoiced costs, and(ii) an addition of $243,535 was made because the workscope was not sufficient – only workscope of level 2.3 had been accomplished whereas level 2.9 would be required for the Return Condition. FWA also deducted $688,178.36 that had been charged in respect of replacement LLPs. That gave a total claim of $5,082,680.51. The deduction from the engine shop visit invoice of the sum referable to the replacement of a number of the engine LLPs was made to this element of the presentation of the claim, not because FWA did not claim that cost, but because it sought to include them separately for consideration along with its claims for replacement LLPs that it had not carried out. However, it seems to me clearer to keep these costs with the remainder of the claim for the engine shop visit costs that have been incurred given the conclusions I have reached as to the irrecoverability of costs not actually incurred by FWA.[271]The premise for FWA’s putting the claim together in that way was its contention that it was entitled to claim not only for costs incurred, but also for the cost of work to put the engine into the Return Condition even if that work had not been done. As I have held above, it is not entitled to claim that. As a result, the addition of $243,535 cannot be made. The reversal of the $200,000 also should not be made. That was offered by Eagle Services as a commercial solution because they had performed a 2.3 level workscope rather than a 2.9 workscope in respect of certain components. However, the fact it was a commercial solution is nothing to the point – FWA only paid the sum subject to the discount and it cannot claim more than the work actually cost.[272]VietJet and Mr Brown argued that FWA should be entitled not to the costs actually incurred, which were based on 2023 prices, but on the costs that would have been incurred if the work had been done at 2022 prices. There is no basis for that. It was the 2023 prices that were actually used. That was the price that Eagle Services charged to FWA, and it was not unreasonable for FWA to have agreed it. The Aircraft, including the engine, was redelivered only on 15 December 2022, giving little prospect of FWA being able to negotiate a deal for the engine shop visit using 2022 prices. Insofar as it was suggested that it was unreasonable for FWA to agree to those prices because it should have sought for the engine to be inducted under VietJet’s FMP, I reject the suggestion. Given the dispute that had arisen between the parties, and the fact that FWA had had to go to court for an order in order for VietJet to redeliver the Aircraft, it was entirely reasonable of FWA to consider it ought to have its own arrangement with Eagle Services.[273]Another suggestion made at trial by VietJet was that FWA might have sought to negotiate with the party to which it ultimately leased the NEOs in 2025 (namely, Turkish Airlines) such that they leased the engine in its defective condition and performed the required work under their own FMP. It is right that Mr Creaven contemplated seeking Turkish Airlines’ assistance in getting some leverage with Pratt & Whitney and considered it might have been possible for Turkish Airlines to lease the defective engine, however it was largely speculative as to whether Turkish Airlines would have agreed to do so and, if so, on what terms and/or whether that would have accelerated the overall process. It is certainly difficult to see how it would have been sorted out by the end of 2022 in order to get the 2022 prices. Whilst, therefore, this may have been a possibility, its existence does not mean that what FWA did was unreasonable. On the contrary, it was reasonable to seek to get the engine repaired and into a serviceable condition in its own name and then seek to lease the two NEO Aircraft.[274]VietJet and Mr Brown also contended that FWA had not given credit for warranties that were available to it. However, that is incorrect. The final invoice for the work done at the shop visit shows the application of the credits that were granted by Eagle Services. By the end of the trial, it appeared that the contention that was made was that there ought to have been, in addition, a “Parts Life Limit Credit Allowance” applicable to the replacement of some of the LLPs.[275]This allowance was found at paragraph 4.1.2 of the “Warranties and Services Policies for the PW1100G-JM Engine” issued by IAE LLC (August 2023 revision). The allowance was applicable in relation to what were referred to as “Class C Primary Parts”, in circumstances where “a Parts Life Limit is reduced which results in Part Scrappage in less than 7,000 total Parts Cycles”. The “Part Life Limit” was the maximum allowable total Parts Time (i.e. number of flight hours) or total Parts Cycles (i.e. number of times a Part completes a takeoff and landing cycle) as “established by IAE LLC and the applicable Airworthiness Authority.” The allowance therefore applied where the certified part life was reduced with the result that the part had to be scrapped after less than 7,000 cycles. In other words, a reduction in certified part life was required, and the removal of the part had to result from that reduction. That might occur when IAE or the airworthiness authority determined that a part could only be safely used for a shorter time than that for which it was first certified. It made sense that there should be an allowance in such a situation, where a part had been previously fitted with one anticipated life, but that the certified life of it had been subsequently reduced (for example, due to a safety concern with it) such that it had to be removed.[276]However, Mr Brown sought to contend that this allowance was applicable whenever a part was replaced before it reached 7,000 cycles. That is not, however, a tenable reading of the relevant provision. It ignores the opening words of paragraph 4.1.2:
“If a Parts Life Limit is reduced which results in Part Scrappage …”
. It is clear that the allowance is triggered by a reduction in the Parts Life Limit. There was no evidence that this condition had been fulfilled in respect of any part which was replaced at the shop visit. It is therefore not surprising that the allowance was not given by Eagle Services, and not requested by FWA.[277]A further point made by VietJet was that no credit was given on the invoice for the “LPT Stage 1 Disk” although credit was given for the “LPT Stage 3 Disk”. However, no case was advanced why such credit should have been given. An explanation was provided in the covering email (dated 28 February 2025) with the final invoice for the shop visit which explained the reason for the different treatment – both disks were damaged and were replaced. However, the stage 3 disk was repairable, but it was decided that it would be replaced with a used part in order to keep the delivery schedule – hence the credit against most of the cost for this replacement. The stage 1 disk, by contrast, was “truly scrap” and so received no credit. There is no reason to think that explanation was not correct, and it was reasonable for FWA to pay what was charged in this respect.[278]Accordingly, FWA can recover under this indemnity its costs in relation to the engine shop visit in the sum it sought, but without(i) reversing the $200,000 discount,(ii) adding the additional sum to deal with the difference between workscope 2.3 and 2.9, and(iii) including the cost it incurred for replacement LLPs at this shop visit. This amounts to $5,327,503.87. Costs not incurred[279]As I have set out above, on the proper construction of clause 20.4 as I have determined it to be, the dispute as to what the (reasonable) costs would be to put the NEO Aircraft into the Return Condition does not arise. However, the parties and their experts devoted a substantial amount of evidence and time at trial to these points, and I will set out my views in relation to them.

(i) LLPs

[280]The Return Condition required each engine LLP to have 100% of its cycles remaining according to the engine manufacturer’s then certified life limit. None of the LLPs satisfied this requirement on redelivery. The full cost of a complete set of new LLPs across all engines would have been approximately $23 million. However, that was not what FWA claimed. Rather, FWA made a claim calculated on a “life used” basis. The methodology explained in the FCAS was based on(i) the calculation of a cost for each LLP per cycle using the 2023 catalogue list price for the LLP (less any credit that would be provided under the LLP plan) plus a handling fee, 5% was added for the handling fee, but with a cap of $10,696, which was said to be taken from the FPA for engine 771335. and dividing that by the certified life limit of the LLP, then(ii) multiplying that cost per cycle by the number of total cycles that LLP had been through since new, and(iii) adding 10% for stub life.[281]Mr Brown and VietJet agreed in principle with the use of a “life used” methodology, but contended that(i) 2022 LLP prices should be used (rather than 2023 prices),(ii) there should be no additional amount for stub life, and(iii) other deductions should be made for warranties and similar matters that they said FWA had not included in its calculations.[282]As to the point about 2022 vs 2023 prices, the indemnity (if, contrary to my decision above, it applies to the cost of replacing parts that have not been replaced) seeks to calculate what would be the reasonably determined cost of replacing the LLPs with those which had 100% of their cycles remaining. It is unrealistic to think that, given a redelivery on 15 December 2022, FWA could have negotiated an agreement to replace all of these LLPs on all four engines in the remaining 2 week window of the calendar year such as to entitle them to the 2022 prices or that they would otherwise be able to obtain the 2022 prices. It would have been reasonable for FWA to determine the cost of these replacements using the 2023 prices.[283]As to the additional amount sought for stub life, that is a matter that is also raised in the context of the diminution in value claim (which I consider below). “Stub life” is a term used to reflect the fact that engine LLPs are not replaced one by one, each when it has exhausted its maximum number of cycles, but tend to be replaced in blocks, some of which are closer to the end of their maximum number of cycles than others. The stub life is the number of cycles remaining on an engine LLP that end up not being used. Mr Bull’s view, for example, was that stub life typically ranged from between 5% and 15% of the LLP life. I deal with this point in more detail below, in the context of the diminution in value claim, and where I conclude that no uplift for stub life should be made. For similar reasons, it should not be made in this context.[284]In summary, FWA has chosen to bring its claim on a “life used” basis, in other words a calculation of what the life used of each LLP was worth, in the context of a replacement part, such as to provide a proxy to the cost of replacing the partly used existing part with a new part. The addition of a 10% stub life value would seek to provide FWA with some cushioning against the likelihood that some part of the certified life of each LLP would not, in fact, be used. However, that would overcompensate FWA in these circumstances. The contract provides for the LLPs to be replaced with those that have 100% of their cycles – any part with 100% of its cycles carries with it the likelihood that 100% of its cycles will not actually be used, because it will end up being replaced before that point in time (because at least one other part with fewer cycles has to be replaced) – such that that is inherent in aircraft LLPs and their maintenance. An owner may be able to negotiate some form of compensation to reflect stub life when agreeing a contract to replace LLPs, or it may not, much as a lessor may be able to negotiate a stub life allowance in relation to the maintenance reserves in a lease. However, there is no inherent entitlement to such an uplift, and it is not part of the cost of replacing the parts themselves.[285]Accordingly, no addition should be made for stub life.[286]In relation to the additional warranties that Mr Brown contended should be taken into account, first, the same point was made here as I have already considered in the context of the claim for the costs of the engine shop visit for engine 771335 in relation to the Parts Life Limit Credit Allowance. For the same reasons as I have already given, this does not give rise to additional deductions that would have to be made, there being no evidence that this allowance would apply to replacement of any of the LLPs in question.[287]Second, Mr Brown contended that for each of the engines FWA would be entitled to a “Block D upgrade” for 6 LLPs, for which they would not be charged. This appears to have originated from his observation that, in respect of the engine 771335 shop visit, certain LLPs had been replaced without charge as part of upgrades which he referred to as “Block D”. His evidence (which it is fair to say developed in his oral evidence from that which he had put in writing) was that the Block D programme comprised a series of upgrades made by Pratt & Whitney to engines of this type, as part of which certain LLPs were replaced free of charge. He said that this was evidently done for engine 771335 in its shop visit and would be done for the other engines at their next shop visit. In fact, his evidence appeared to be that those LLPs replaced free of charge on engine 771335 would be replaced again, free of charge, in that engine in a future shop visit, as well as on the other engines.[288]The basis for such future replacements being done free of charge (whether on engine 771335 or on the other engines) was, however, speculative and not grounded in any firm evidence. What appeared from the evidence to be the position was as follows: i) The six Block D LLPs that were replaced free of charge on engine 771335 at its shop visit were identified under a series of service bulletins listed in Attachment 10 to the Fixed Price Agreement (“FPA”) between FWA and IAE / Eagle Services dated (as of) 21 March 2024. Those service bulletins noted that those LLPs would be replaced and other work undertaken as part of “Block D upgrade” (which they were), but there was nothing to suggest that once those service bulletins had been performed they would be repeated. ii) It also appears that those service bulletins had been performed and the six LLPs replaced on each of the other three NEO engines. This was evident from the documentation, and was confirmed by Mr Bull and accepted by Mr Brown when they gave evidence. iii) Mr Brown sought to advance his point by contending in cross-examination that there were further service bulletins, or revisions to the existing service bulletins, that Pratt & Whitney had issued, which required further replacements. However, he accepted that the service bulletins that were in evidence at trial did not suggest the LLPs would be replaced again, and also that he had not seen the latest revisions which he contended did so. He suggested in cross-examination that his understanding was based on discussions he had had with individuals at Pratt & Whitney, although he had not said anything about such discussions in any of his reports, and he had no documentary material to support or evidence such discussions. In re-examination he then slightly changed his tack and, rather than saying there were revisions to service bulletins that he had not seen (because they were proprietary, as he said under cross-examination), he said that there were no “specific service bulletins that refer to the block D upgrade programme at this point in time” but that it was an “undertaking from Pratt & Whitney”. There was, again, no supporting evidence for the existence of such an undertaking. iv) Mr Brown suggested at one stage that the further (or revised) service bulletins were identified in a presentation, a copy of which he had appended to his third report, given at “the PW1100G-JM Conference” in October 2024. However, that presentation did not identify such further or revised service bulletins requiring the six LLPs to be replaced. It included a “roadmap” detailing a plan for investment in configuration upgrades, but that appeared to show that the six Block D LLPs were changes that had taken place in 2020, and there was no suggestion of further replacement of those LLPs as opposed to other potential upgrades to the engine.[289]Two points can be made in summary. First, there was no objective evidence that the six LLPs that were replaced free of charge as part of the Block D service bulletins identified in Attachment 10 to the FPA for engine 771335 would be repeated (the same service bulletins having previously been carried out for the other three engines). Second, Mr Brown’s evidence on this was generally unsatisfactory in the way that it emerged, in its lack of proper anchor in the documentation, and in the way it changed as he gave his evidence.[290]Accordingly, there is no basis to apply the reduction for further Block D LLP replacement for which Mr Brown contended.[291]In summary, in relation to the claim for the life used on the LLPs, if this was recoverable under the indemnity, FWA would be entitled to maintain the claim it has brought, but without the addition of 10% for stub life. (ii) Engine Performance Restoration Shop Visit[292]The sub-leases for the NEO Aircraft required that the engines and each of their modules be returned fresh from an Engine Performance Restoration Shop Visit (“PRSV”). It is common ground that when redelivered the engines did not comply with this condition. Engine 771335 did complete the shop visit referred to above, and I have dealt with the cost of that and its recovery by FWA under the indemnity above. The other three engines for the NEO Aircraft did not have a shop visit post redelivery, such that I have determined that the cost of such a visit is not recoverable under the indemnity. However, if FWA was able to recover this as a cost under the indemnity, it contended that it should do so using a methodology based on the shortfall of funds needed for a qualifying shop visit for each of the engines taking into account future maintenance reserves that would be accrued whilst the new lessee consumes the remaining usable engine life. In other words, FWA(i) calculated an assumed future cost of a performance restoration, using Pratt & Whitney’s published maintenance reserves using various assumptions, added a cost for accessories, fees and testing (as similar costs have been incurred for engine 771335 at its shop visit), and an additional sum for expanding the workscope from level 2.3 to 2.9;(ii) calculated an assumed contribution from the next lessee, again using a series of assumptions; and(iii) then subtracted (ii) from (i) to give the shortfall.[293]This was a different methodology for that which had been used to calculate the LLP cost (as set out above), where a “life used” methodology was agreed in principle by both parties to be appropriate. FWA contended that using a “life used” methodology for the engines would expose it to a potential shortfall if that did not generate a sufficient sum to cover the difference between what it might collect from the next sub-lessee and the actual cost of a PRSV.[294]VietJet, however, contended that the industry standard was to use a “life used” methodology and that FWA’s shortfall method relied on a series of assumptions, a number of which were questionable. VietJet’s criticisms of the shortfall methodology were well made. i) The shortfall methodology used by FWA uses a series of assumptions, giving it an in-built level of uncertainty. For example, it made assumptions of derate, of flight hour to flight cycle ratio, the number of hours between shop visits, as well as of various costs (such as the additional figure for accessories, fees and testing). Whilst some were based on firm figures (for example the figure for accessories, fees and testing being based on the sum added to the engine 771335 shop visit), for others it was less clear whether it would be accurate (e.g. the 15% derate). ii) There were inconsistencies in some of the assumptions used with no good explanation. For example, in calculating the assumed future cost of a PRSV (i.e.(i) in the above description), a flight hour to flight cycle ratio of 2.5 was used; but in calculating the contribution from the next lessee (i.e.(ii) above), a flight hour to flight cycle ratio of 2.87 was used. iii) The collection rate arrived at (under (ii) above) was $282 per hour, but it was not clear why the actual rate agreed in the leases to Turkish Airlines (which FWA are actually collecting) was not used, which using the same assumptions of derate and hours to cycles ratio would be $310 per hour. iv) The reason FWA said the shortfall method should be used rather than the life used method (which would have been more of an industry standard methodology), was to combat the uncertainty of the costs the Lessor might be exposed to. Mr Bull suggested for example that there was uncertainty because the Lessor would be on the hook for anything that went wrong with the engines. However, the shortfall method does not in any event grapple sufficiently with the uncertainty. It does not seek to address things going wrong with the engines any more than the life used method does. The shortfall method makes a series of assumptions which themselves may or may not be accurate or sufficient. v) Moreover, if the shortfall method was appropriate, it is difficult to see why a similar methodology should not have been used for the cost for the LLPs (or indeed the other components) which are also capable of failing, and where FWA also carries risk under the next leases.[295]The fact that the shortfall method was fairly accepted by Mr Brown in cross-examination that it was a possible method, as emphasised by FWA, is nothing to the point. It is a possible method, but for the reasons set out above, it is not an appropriate one in the circumstances. It would be more appropriate to use an orthodox life used basis of calculation. The parties did not expressly address in their closing submissions the detail of Mr Brown’s calculation on that basis such that, if I had been determining the payment under the indemnity on this basis (which, as explained above, I am not), then I would have sought further input from the parties about this. (iii) On condition and condition monitored parts[296]The sub-leases for the NEO Aircraft required the on-condition parts and the condition monitored parts to be overhauled and supported by appropriate certification documents. Neither Aircraft complied with this requirement. FWA claimed the cost of these parts (insofar as they were not actually replaced) in the total sum (for both Aircraft) of $1,238,423.49. Mr Brown accepted, by contrast, that a reasonable amount (for both Aircraft) would be $806,000. FWA calculated its claim in this respect on the following basis: i) When a new part would be required, FWA claimed 80% of the cost of a new part, plus a shipping/handling cost set at 20% of the price but capped at $1,000. Only 80% was claimed to reflect the value of the existing non-compliant part. ii) Where a part would be overhauled, the price of a new part was obtained and that amount was then reduced by a percentage depending on the value of the part using a sliding scale, and a shipping/handling cost at 20% of the price of the new part (capped at $1,000) was added.[297]This methodology was used because it was said not to be realistic to try to obtain actual quotations for each part in the abstract. Mr Brown accepted that going to individual part suppliers would not have been realistic. However, he pointed out that there were databases for parts which include parts in overhauled states which it would have been possible to use (he had looked at a database called ILS).[298]It was not clear from Mr Brown’s reliance on the price of parts he had identified in the ILS database that all items were entirely comparable. However, it demonstrated the potential inaccuracies in the estimate methodology used by FWA and the substantial degree of assumption it used. Moreover, it became clear during Mr Brown’s cross-examination and the closing submissions that FWA sought to defend its approach by saying that it was reasonable for it to include amounts which covered the potential cost of defects being found leading to an increased cost of overhaul. But there was no basis to include that sort of “cushion” where there was no analysis or evidence of whether there were likely to be defects or, if so, to what extent.[299]FWA sought to perform a “sense check” for their methodology using 78 components that had actually been replaced (and claimed for under FCAS claim 7) and for which invoices had been provided. A comparison was made between the actual costs of those parts and what the estimate methodology would have derived for those parts. It demonstrated that the overall total would have been over 10% higher using the estimation methodology than the parts actually cost. That is not an insubstantial difference, and would suggest that the estimation methodology would overcompensate FWA if used in respect of the On Condition and Condition Monitored parts.[300]FWA’s submissions suggested Mr Brown’s assessment did not take shipping and handling into account, but when this was put to him in cross-examination, he said that it did, and that was not then challenged.[301]Accordingly, if the costs of these parts which had not been replaced or overhauled was recoverable under the indemnity, I would have preferred Mr Brown’s view of what was a reasonable cost. (iv) Galleys/lavatories/seats[302]The galleys, lavatories and seats (for flight attendants and passengers) were not removed and refurbished as they needed to be for the Return Condition. FWA had obtained an estimate for this work of £892,148 for the two Aircraft from Regent Aerospace Corporation, and used that as the basis for its claim of the reasonable cost. As Mr Bull noted in his report, it was an estimate based on assumptions, and noted that there may be additional costs if, for example, any structural components in the seats were found damaged or needed repair. There were similar exclusions in relation to the galleys and all parts replaced in the lavatories would be an additional cost. It is also right to say that the proposal was based on the work being performed in the USA, although the Claimant did not in any event intend to have the work performed by Regent and it is likely to have been more expensive than to have it performed elsewhere. Thus there were aspects to it which suggested it may have been an over-estimate of a reasonable cost (e.g. getting the work done in the USA) and there were others that suggested it may have been an under-estimate (e.g. the exclusions /additional potential costs mentioned).[303]Mr Bull noted that some work to the cabin may be done by Airbus at a Heavy Maintenance Check, which was claimed for elsewhere, such that he reduced what he thought was reasonable by $30,000 per Aircraft, with the result that the claim he supported was for $832,148.[304]Mr Brown’s view was that the existing equipment was serviceable and could be acceptable to a future lessee, who would be eager to secure the Aircraft and was unlikely to reject it due to non-refurbishment of these items. However, that was not a point open to VietJet given that the Return Condition required this work to be carried out. He also noted that the quotation was from a company in the USA and that it may have been more reasonable to obtain a quotation from somewhere else (as I have noted above). His view, which appeared to be unsupported by any written material such as a quotation, was that the cost would be $120,000 per Aircraft (which he said was based on $20,000 per toilet and $30,000 per galley).[305]I prefer FWA’s case on this issue. Whilst the Regent Aerospace estimate may be an over or an under-estimate, it is a reasonable place to start, and Mr Bull has subjected it to detailed analysis. Mr Brown, by contrast, has estimated a figure for what appears to be a lesser amount of work (because he thought much of the work was unnecessary) and in any event he did not provide any documentary support for his view of a reasonable cost. If FWA had been able to claim this under the indemnity, I would have awarded $832,148.

(v) Other parts not new

[306]This relates to other internal parts that, for the purposes of the Return Condition, were to be replaced with new parts, but were not. They include(i) the overhead binds, interior panels and related seals,(ii) galley flooring, carpets, curtains and seat covers/foams,(iii) galley equipment, and(iv) cargo compartment floor and sidewall/ceiling panels.[307]As VietJet put it in its skeleton argument for trial, the fundamental difference between the parties for these parts is whether FWA can claim for the (hypothetical) costs of such replacement. That question turns on the construction issues relating to the clause 20.4 indemnity that I have already considered, such that because these parts have not been replaced, the (hypothetical) cost of replacing them cannot be recovered. However, if I am wrong about that, they can be and, as with the previous set of items, the question of reasonableness arises in relation to the cost of doing the work, not as to whether the items should be replaced at all. Thus, on the hypothesis on which this is being considered (i.e. that I am wrong on the question of construction), VietJet’s central theme, characterising the complaint as “perfectly good parts have not been replaced with completely new parts” is not relevant (that point being dealt with by the construction point).[308]FWA’s claim was calculated on the basis of the cost of a new part or similar part, adding a markup of 20% (capped at $1,000 or $4,000 for larger parts) for shipping, handling, labour, etc, and deducting 20% to reflect the value of the removed used part. Mr Bull explained his view that this was a reasonable methodology, and I agree. As I say, the thrust of VietJet and Mr Brown’s objections were not that this method was not reasonable if one was seeking to assess a reasonable cost of replacing all these items with new, but rather that in the normal commercial world no-one would do this, such that it would not be reasonable to embark on the exercise at all. It was clear from his evidence that Mr Brown’s figures were not directed at the cost to comply with the Return Conditions, and that his assessment did not include a cost for the replacement of all the parts.[309]In the circumstances, if replacement of these items could be claimed under the indemnity, I would prefer FWA/Mr Bull’s figures. (vi) Wheels, tyres, brakes[310]The claim was put on a similar basis to the previous items, i.e. the cost of new parts less 20% for the value of the removed used part, save that for MSN 8906 the wheels were overhauled, such that that was the cost that was claimed for the wheels for MSN 8906.[311]Mr Brown’s approach to this cost was to use a “life used” approach, taking the overhaul cost of a brake unit as $60,000 and a life of 2,500 flight cycles. However, as Mr Bull pointed out in his third report, none of the items claimed here have life limits, in contrast to the LLPs where a “life used” approach was agreed, such that expected life has to be estimated. More fundamentally, Mr Brown’s “life used” approach may be an entirely reasonable way of assessing the value in the part that has been lost due to use, compared to a new part, but it does not calculate a cost of replacement. As with the previous set of items, therefore, I prefer the approach of FWA and Mr Bull. (vii) Fuel on board on redelivery[312]The issue between the parties was whether FWA could claim for a tank of fuel for MSN 8937 (in the sum of $15,173). This turns on whether there was fuel in the tank when it was redelivered or not. The Transfer Letter for MSN 8937 identifying the state of the Aircraft on redelivery did not record the fuel level. Mr Bull accepted this claim on the basis that MSN 8937 did not have fuel on board on redelivery. Mr Brown rejected it, saying no assumption could be made about the fuel level such that no claim could arise. VietJet adopted that saying that FWA bore the burden of proof and they could not prove there was no fuel on board, so could not claim based on the tanks being empty.[313]At Appendix 1 to the Transfer Letter for MSN 8937, on the line labelled “Fuel level”, no figure was filled in. This can be contrasted with the Transfer Letters for the other Aircraft, where a figure was given, for example in the MSN 8906 Transfer Letter, the figure 4,380 kg was given. The Transfer Letter for MSN 8937 also noted, at Appendix 4, that “the fuel tanks are not full”. The consequence is that either i) there was some fuel in the tanks (like the other Aircraft), but they were not full, or ii) there was no fuel in the tanks. Of these, it is more likely to be (ii). First, if there had been fuel, it is likely to have been measured and the figure entered, as on the other Transfer Letters. The blank is, in that sense, equivalent to a zero. Second, this is also likely to have been the case given the situation with MSN 8937 on redelivery, namely that its engines had been removed and it was subject to a lengthy grounding. Keeping fuel in the tanks for a period of time without use would have given rise to a risk of degradation in the fuel and a risk of corrosive damage in the fuel tanks due to the high humidity in Vietnam. Mr Brown explained in his oral evidence that, if fuel had been on the Aircraft for that period of time, it probably would have had to have been dumped as it would likely have been contaminated. For both of those reasons, the likely reading of the Transfer Letter for MSN 8937 is that the fuel tanks were empty. FWA were correct to make this claim. The diminution in value claim[314]VietJet’s case was that FWA was entitled to either i) an indemnity for the reasonable costs actually incurred of putting the NEOs in the Return Condition or ii) damages to be assessed at the difference in value between the NEOs as they were in fact returned and as in the Return Condition. VietJet conceded that FWA was entitled to pursue these claims in parallel and to elect between them at date of judgment.[315]In relation to the claim for diminution in value, whilst the parties did not address in detail whether it was properly analysed as a claim under the clause 20.4 indemnity or a claim for damages for breach of contract (with FWA tending to refer to it as the former, and VietJet as the latter), neither party suggested it made any difference to the outcome on the facts and in the circumstances of this case.[316]There was also a fair degree of agreement between the parties and their experts as to the approach to the diminution in value calculation. The experts agreed on the methodology – they both calculated the diminution in value for each major component (i.e. the airframe, the landing gear, the engines and the Auxiliary Power Unit (“APU”)) by multiplying(a) the difference in % life remaining as of the redelivery date (15 December 2022) and full life, and(b) the cost of restoring the component to full life condition. In other words, they both directly calculated the diminution in value, rather than calculating the value of each Aircraft (i) in the Return Condition and (ii) in the condition they were in on redelivery, and then subtracting one from the other. The experts agreed on a number of the inputs and assumptions for that calculation, but not on all (although the matters in dispute narrowed during the course of the trial). By the end of the trial, the parties’ and their experts’ overall positions were that the diminution in value for the two NEO Aircraft was as follows: i) MSN 8906: FWA/Mr Kelly: $6,417,146 VietJet/Mr Brown: $5,772,395.26 ii) MSN 8937: FWA/Mr Kelly: $8,740,849 VietJet/Mr Brown: $7,213,517.89[317]The four remaining issues of dispute between the experts that gave rise to their different calculations that were addressed by the parties in their closing submissions were: i) Mr Kelly included a 10% uplift to reflect the loss of “stub life” on what were the otherwise agreed values for LLP parts cost and Life Used Compensation. ii) Mr Kelly assumed an engine shop visit cost of $4 million and an interval of 6,500 cycles, whereas Mr Brown assumed an engine shop visit cost of $3.33 million and an interval of 8,000 cycles. iii) Mr Kelly provided for a cost of $1.12 million for the next 6 year check, whereas Mr Brown provided for a cost of $462,551 in this respect. iv) Mr Brown discounted for those LLPs which he contended that FWA would receive free of charge at some stage by reason of what he referred to as the “Block D upgrades”. Stub Life[318]As I have already explained when dealing with the claim for costs claimed but not incurred under the clause 20.4 indemnity, this is a term used to reflect the fact that engine LLPs are not replaced one by one, each when it has exhausted its maximum number of cycles, but tend to be replaced in blocks, some of which are closer to the end of their maximum number of cycles than others. The stub life is the number of cycles remaining on an engine LLP that, as a result, are not used. Mr Bull’s view was that it typically ranged from between 5% and 15% of the LLP life.[319]In explaining his diminution in value calculations in his report, Mr Kelly’s justification for increasing the value of the engine LLPs by 10% to reflect stub life was relatively thin. In fact, the joint report recorded that he had been instructed to include a 10% uplift on this basis, and it appeared from his cross-examination that he had been supplied with the relevant figures by FWA. The justification he gave in his second report for applying the 10% uplift was that using a 10% stub life is common in aircraft leases, and that Airbus uses a 10% stub life assumption in its Maintenance Reserve Booklet, which it did in setting out indicative data to assist leasing parties to calculate a monthly reserve rate. However, that use of stub life is not for the purpose of aircraft valuation, but for the purpose of calculating maintenance reserves. Mr Brown accepted that a 10% stub life provision appears in some lease agreements in connection with forward maintenance reserves (although he said that was more common previously than with more modern engines and engine contracts), but that is part of a lessor’s commercial risk mitigation for collecting maintenance reserves from a lessee. A lessor might assume, for example, that it would lose the value of the 10% stub life in each LLP because it would be replaced before it had reached 100% of its cycles, such that it would seek to increase the figure for the cost of each LLP in the maintenance reserve calculations to seek effectively to recoup that cost from the lessee. Mr Brown referred to a respected industry commentator, Shannon Ackert, who explained stub life to this effect, and Mr Kelly broadly agreed.[320]However, including a figure for stub life in a lease when dealing with maintenance reserves is not some automatic or universally adopted process. As Mr Brown said, and Mr Kelly agreed when cross-examined, it is a matter of negotiation between lessor and lessee. In addition, it was Mr Brown’s evidence that it was not normal practice in appraising aircraft values to apply a 10% stub life. Mr Kelly did not directly dispute that when it was put to him, but rather said he thought it was appropriate in this case because it was a question of assessing damages.[321]What Mr Kelly’s 10% uplift in fact achieves is a value beyond the Return Condition. If the Aircraft had been returned with every LLP having 100% of its cycles remaining, it would (insofar as this aspect is concerned) have complied, yet because of the nature of the replacement cycles of LLPs, the LLPs would in due course have been replaced having used less than 100% of their cycles. FWA was entitled to LLPs with 100% of their cycles remaining, but not for additional value relating to those LLPs on top of that. There was no requirement in the sub-leases in this case for a stub life value to be added, and in fact stub life does not appear as a term in the sub-leases at all.[322]Accordingly, I prefer Mr Brown’s evidence on this point. In carrying out the task of calculating the diminution in value in the Aircraft on redelivery compared to the Return Condition, there should be no 10% uplift for stub life. Engine shop visit cost[323]The two variables here were the estimated cost of a shop visit for the NEO Aircraft’s engines in December 2022 and the maximum number of engine cycles before the next shop visit. Mr Kelly assumed a cost of $4m and an interval of 6,500 cycles, whereas Mr Brown assumed a cost of $3.33m and an interval of 8,000 cycles.[324]The original source for Mr Kelly’s cost estimate was obscure. In the joint report he explained that he had used the “AVITAS Shop Visit” cost of $4 million for a 5,000 cycle interval (although he subsequently amended his calculations to use a 6,500 interval). He said that was based on “industry sources” and had been “adjusted” from an original estimate of $5 million for a 6,800 cycle interval. He appeared to explain this in cross-examination by saying this is what AVITAS would have assumed in 2022 and said it was based on data from many “industry sources”, but he did not identify what they were. He said he could not do so, for reasons of confidentiality, and had not sought any consent as he did not think this would be a controversial point (a surprising assertion from an experienced expert who must have known, from his exchange of reports and joint memorandum with Mr Brown, that this issue was not agreed). He also, in cross-examination, referred to having received a document from Pratt & Whitney from October 2022 advising that a shop visit cost would be $5 - 5.3 million which he had decided not to use directly in his report (he said he could have used it to change his estimate from $4 million to $5 – 5.3 million, but did not seek to do so), though he did not exhibit that document to any report or otherwise produce that document at the trial (nor did FWA identify it). This was clearly unsatisfactory as it left VietJet (and the Court) with no way of properly testing that estimate or whether it was appropriate for this exercise.[325]Mr Brown’s estimate of $3.33 million was that contained in Airbus’s 2022 Maintenance Reserves Database (the same document that Mr Kelly had relied on in relation to his position on a 10% uplift for stub life). He also noted that the cost of a performance restoration relied upon by Mr Creaven in his evidence for FWA was $4,269,990 in 2024, which if deflated back at 10% per year to 2022 would give a cost of approximately $3.2 million. Although those costs related to a unique engine shop visit event outside a fleet management programme, the figure broadly supported his estimate. That was also consistent with the 2024 engine overall cost published by Airbus as $4,008,773. Mr Brown was not challenged in cross-examination on his use of the $3.33 million figure.[326]In light of the above, I prefer Mr Brown’s position on the cost of the engine shop visit in 2022. He explained where his figure came from, identified his source, and supported with other consistent material, and he was not challenged on this when cross-examined. Mr Kelly’s figure, by contrast, did not have a properly identified or supported source and the attempts to support his figures by reference to undisclosed material when cross-examined were unsatisfactory.[327]There was even less focus on the number of cycles element when the experts gave oral evidence. Mr Brown was not asked about it at all, and the questions asked of Mr Kelly largely sought to demonstrate that the number of cycles did factor into his calculations, contrary to what he started off by saying (somewhat surprisingly) in his oral evidence that they did not come into play in his analysis at all. In fact, the position adopted by each expert was contrary to the interests of the party instructing them – the larger number of cycles (favoured by Mr Brown) led to a larger difference in value figure; the smaller number of cycles (favoured by Mr Kelly) led to a smaller difference in value figure. Given that I preferred Mr Brown’s evidence on the cost of a shop visit, it is consistent and makes sense to adopt his figure for the number of cycles as well, in particular given that he was not challenged on it in his oral evidence. Cost of a 6 year check[328]Mr Kelly’s figure was $1,123,400. Mr Brown’s figure was $462,551.[329]Mr Kelly’s figure appeared in the relevant tables in his reports, though there was no explanation where it had come from. Mr Brown produced his, much lower figure, based on the Airbus Maintenance Reserves Database for 2022, discounted to take account of the lower labour costs in Vietnam. However, some of the assumptions used by Mr Brown in coming to his figure were disputed: i) As noted, he discounted from the standard labour rate used by Airbus ($75 per hour) to take into account lower labour costs in Vietnam (he used $50 per hour). He confirmed in cross-examination that he had made an assumption that any future airframe checks would take place in Southeast Asia (where, he said, labour rates tend to be lower). However, that was not necessarily going to be the case – the Aircraft might be used in various different parts of the world. Moreover, the calculation methodology adopted by both experts to determine diminution in value was not one focused on where the Aircraft had been, or what costs had in fact been saved, but was a proxy for the value of components in their condition on redelivery compared to the Return Condition. It sought to identify the value in the aircraft that had been “used” before redelivery. That being the case, there was no reason to assume the labour rate for Southeast Asia (or indeed to assume a high rate such as that charged by Shannon Aviation in respect of the CEO Aircraft after they had been exported, of $108 per hour). It would have been more appropriate to use the standard Airbus rate as used in their general model for 2022, namely $75 per hour. ii) He used an engine derate figure of 25% (derate being when an aircraft’s engines are operated at less than their maximum thrust capacity, usually during take-off or climb) – Mr Brown confirmed in his oral evidence that a higher derate level reduces the maintenance cost per flight. It was put to him that 25% would be regarded as quite high, which he took issue with. He noted, from looking at the detail of how these aircraft had performed under VietJet, that they had achieved a derate higher than 25%. It was pointed out to him that the Airbus Maintenance Reserves Booklet, in respect of the A321 neo aircraft generally used a derate figure of 14.1%, but it is difficult to put too much weight on that given the page expressly noting that it set out “indicative data for reference only” and there was no other explanation of it. Given that what the diminution in value calculation was seeking to identify was the extent to which the Aircraft had been used, such that they fell below the Return Condition, it is more appropriate to use the derate that was observed when the Aircraft were in use by VietJet, because that is what will actually have had a bearing on the loss in value in these Aircraft. This is different from the approach in relation to labour rates which does not go to the state of the Aircraft, but to an estimate of the cost of the work that will be required. As noted, Mr Brown observed this had been higher than 25%, and he was not challenged on that. In the circumstances, he was right to use the 25% figure for the derate. iii) FWA also took issue with the sector level assumed by Mr Brown. He had assumed a sector length of 2 hours, the relevance of this factor being that shorter flights generally involve more stress on the engines. The 2 hour sector length was consistent with the indicative figures in the Airbus database. FWA put to him that after the leases had been terminated they only operated within Vietnam (which Mr Brown could not confirm – he did not know whether they were operating on the India routes or not), which it was said included shorter sectors, such that it was suggested a sector length of 1 or 1.5 could have been appropriate. However, there was no evidence put to him as to what the sector lengths actually are within Vietnam – he accepted a Hanoi - Ho Chi Minh City flight would be about an hour (though in its closing submissions, VietJet suggested the flight time was about 1 hour 45 minutes), whilst saying he thought there were other routes in the VietJet network that were longer – and there was no evidence put to him that the Aircraft had in any event not flown longer sectors (outside Vietnam) before the termination date. There was no reason to confine the basis for the assumption to the specific period of time between termination and redelivery. In the circumstances, Mr Brown’s assumption of a 2 hour sector length was reasonable.[330]Against that, it is difficult to assess Mr Kelly’s figure which, as I say, was provided without any explanation and, although he was not cross-examined on the specific figure, nor was his figure or any potential basis for it put to Mr Brown. In the circumstances, it does not appear right merely to accept Mr Kelly’s figure. It is simply not possible to know whether it is a sensible figure or not. On the other hand, the basis for Mr Brown’s figure was clear, and his assumptions capable of interrogation. In the circumstances, I conclude that the appropriate figure should be derived using Mr Brown’s method, but using a labour rate of $75 per hour. Block D upgrades[331]I have already dealt with this in the section above dealing with Engine LLPs. For the same reasons as I have explained there, there is no basis in the evidence for the suggestion that FWA would receive LLPs free of charge at some stage by reason of what he referred to as the “Block D upgrades”. Mr Brown’s adjustments for the Block D upgrades should not be made. Conclusion on diminution in value[332]I have accepted some parts of each expert’s (and party’s) case on the diminution in value claim. I have concluded that Mr Brown/VietJet are correct in relation to there being no 10% uplift for stub life and the cost of an engine shop visit, that Mr Brown’s approach to the cost of the 6-year check should be taken, though using a different labour rate, but that FWA are right that no adjustment should be made in respect of the Block D upgrades.[333]Generally, it will be apparent from the above that I found Mr Brown’s approach on the diminution in value claim to be preferable to that of Mr Kelly, whose methodology was more opaque and who appeared at times in his cross-examination to have a less firm grip on the factors that had gone into his calculation (for example, in relation to whether the number of cycles between engine shop visits affected his calculation). Accordingly, Mr Brown’s calculation should be used, but adjusted(i) to change the labour rate in relation to his calculation of the cost of the 6-year check to $75 per hour, and(ii) to remove his adjustments in respect of the Block D upgrades.[334]I will ask the parties (with the assistance of their experts as necessary) to confirm what the calculation of diminution in value is based on the determinations I have made. If they cannot agree what that calculation produces, I will resolve any dispute about it. Other claims listed in the FCAS[335]I have already identified, above at paragraph ‎70, the claims that were pursued by FWA that were identified and quantified in the FCAS. I have already dealt with the claim that was made under FCAS claim 4, which was the claim for the costs of putting the NEO Aircraft into the Return Condition. FCAS claim 3 (the equivalent for the CEO Aircraft) was not pursued at trial (FWA seeking to claim the costs they had actually incurred in relation to the CEO Aircraft under FCAS claim 7). I deal with each of the other claims made in the FCAS separately below.[336]As a general proposition, given the conclusions I have reached above in relation to FWA’s difficulty in proving it has suffered Loss within the clause 23.1 indemnity in relation to the CEO Aircraft (see in particular paragraphs ‎99 to ‎106 above), the recoverable amounts are generally confined to those incurred in relation to the NEO Aircraft. With the exception of certain small amounts incurred prior to the sale to the Trustee Owners under claim 1(a), referred to below. In setting out the parties’ positions below, however, I generally refer to the global amounts claimed in respect of all four Aircraft, given that is how the numbers were mostly dealt with at trial. FCAS claim 1: Project management, technical support and remarketing[337]This includes claims that FWA contends represent the cost of its establishing systems for understanding the status of the Aircraft and designing a process for their redelivery and remarketing. FWA claims $3,690,636.72, which includes the consultants engaged by FWA to:(1) review and collate the Aircraft Technical Records in order to check compliance with the applicable aviation standards;(2) monitor the storage of MSN 8906 and CEO Aircraft in Hanoi;(3) assist with the technical maintenance planning of the Aircraft and the assessment of the condition of the Aircraft for the purposes of these proceedings;(4) manage the storage of the Aircraft Technical Records; and(5) manage the remarketing of the Aircraft following repossession.[338]FWA has disclosed invoices in support of these costs which, the experts agree, correlate to the sums claimed. Mr Bull considers FWA’s costs to be reasonable in the unusual circumstances in which FWA has found itself, and having regard to what he considers are the steps taken by FWA to reduce its costs where possible. In summary, VietJet and Mr Brown consider that it was unreasonable for FWA to engage external consultants, and that the number of consultants and the period for which they were engaged was unreasonable. They also query the necessity of the work carried out by the consultants and consider that the costs could have been reduced by requiring VietJet to carry out certain works in respect of the Aircraft.[339]As a general point, VietJet contended that the FCAS claim 1 amounts could not be said to arise out of any of the matters listed in clause 23.1 because the establishment of systems, and the use of project managers, consultants and marketeers, is just the consequence of being the owner of a reversionary interest in an aircraft lease. It had to set up these systems and engage contracts because, said VietJet, FWA was a newly-established entity entering the aircraft leasing market. I do not accept that. These areas of cost arose out of the matters listed in clause 23.1, and would have so arisen whether FWA was new to the aircraft leasing market or not. Some lessors have their own internal teams, which as Mr Brown accepted tend to be the larger lessors, and others engage external consultants, and it was reasonable for FWA to be set up in the latter manner. The costs were not incurred merely as a result of being the owner of a reversionary interest, but because – the leasing having been validly terminated and VietJet having not exercised its option to purchase – FWA had to involve itself in matters such as maintenance, records management, and remarketing of the Aircraft.[340]The claim was broken down in the FCAS into 4 components, which I will consider separately.[341]Claim 1(a) was in respect of the cost of technical consultants engaged through third party organisations. The claim was for $2,885,886.43, of which $1,277,892 was accepted as reasonable by Mr Brown. Mr Brown’s view was that an unreasonably large amount of time appeared to have been spent by the external consultants, and that there was inadequate substantiation of the work done. The invoices described their activities at only the highest level. Examples were given of invoices simply describing time entries in very broad terms as “project management”, “planning” and “preparation”. Mr Brown’s view was that it was not normal industry practice for technical consultants to record time spent at such a high level, and it would be more normal for progress to be recorded in a way that would give the project manager a clearer view of what the consultants were doing. Mr Bull accepted in cross-examination that he had not looked to see what particular tasks had been done that made up the sums claimed. In answer to the question whether he had done any exercise of checking whether the time claimed for was a reasonable use of the consultants’ time and whether they had charged reasonably for what they had done, he said he had not done that, because that would be “such an onerous exercise; it’s just not proportionate at this stage.”[342]Mr Brown also made the point that the process of reviewing the Aircraft’s records by FWA’s consultants could have been expedited if data had been exported directly from VietJet’s AMOS system in a usable format such as XML or Excel, avoiding the need to manually reconstruct the records. Whilst Mr Creaven referred to the fact that FWA did not have access to the VietJet AMOS system and VietJet had not provided records in Excel format, he accepted in cross-examination that FWA had never asked for access to AMOS. Whilst he sought to contend in cross-examination that FWA had asked for records in Excel but not received them, he acknowledged he himself had not made such a request, and was not able to point to any document in which such a request was made – ultimately it was apparent that his contention that such a request had been made was on the basis that “that would have been the normal process.”[343]FWA has the burden of proving that the sums it claims fall within the scope of the indemnity and were reasonably incurred. It seems to me that in respect of both of the points I have referred to above, VietJet were right to say that FWA had failed to discharge that burden. In terms of the vague and generalised descriptions on the invoices, there was no real way of seeing what the consultants had been doing or whether it was reasonable (or whether the time spent doing it was reasonable). Although Mr Bull suggested that, taking a very high level view and breaking down the hours spent over the whole period of engagement, the cost of consultants had on average been $2,500 per day, which he said he thought was reasonable as it was roughly one person day per aircraft over the period, he gave no benchmark to compare that against, and it is difficult to assess in the abstract, in particular given the unusual nature of this redelivery and what might (or might not) have been required of the consultants. That was not sufficient to prove that the costs incurred were reasonable. In terms of the records, Mr Brown agreed that it was normal to export records in a usable format such as Excel, but given VietJet did not do so, one would have expected FWA to ask for them in such a format. Given that Mr Creaven was the individual in charge of the process, it should have been straightforward for him to ascertain whether or not a request had been made for the records in Excel or another format which would have assisted FWA, for example by asking the individuals concerned, and given that the point was raised in Mr Brown’s first technical report for this litigation, he had sufficient opportunity to do so. No reason was proffered as to why it might have been reasonable not to request the records in such a format. It appears, therefore, likely that FWA did not ask for access to the records in such a format but, rather, embarked on a (costly) process of reconstructing them, seeking now to recover the cost of that exercise from VietJet. Costs incurred in such an exercise were not reasonably incurred.[344]Accordingly, FWA’s claim under claim 1(a) is confined to the amount Mr Brown regarded as reasonable. Across the four Aircraft, that was $1,277,892, such that the separate number for the NEOs will have to be calculated. In addition, some of the costs under claim 1(a) in relation to SGI Aviation were incurred in late 2021 and January 2022, prior to the sale of the Aircraft to the “Trustee Owners”, with the result that the reasonable costs (i.e. calculated on Mr Brown’s basis) attributable to the period prior to that sale for the CEO Aircraft also fall to be recovered.[345]Claim 1(b) was a claim in respect of the costs of technical consultants engaged directly by FWA. The claim is for $470,522. VietJet contended that the work for which these sums were claimed should and could have been carried out by an employed project manager and/or contracted CAMO provider. Mr Brown’s view was that no cost was reasonable under this head. I do not accept that. Whilst the invoices were not particularly detailed, Mr Bull had looked into the costs and concluded they were reasonable. This was work that needed to be done, in particular given the condition the Aircraft were in when they were redelivered, and it is not realistic to say nothing was reasonable. Where the reasons for the incurring of costs were not obvious, Mr Bull had made specific inquiry (such as to ascertain what costs were being incurred and why in respect of Mr Peroff after the Aircraft had left Vietnam). In addition, Mr Bull explained that there was no unreasonable duplication between the CAMO team (based in Singapore), which was just issuing the work orders, and the technical people on site who were doing most of the planning and forecasting.[346]The one exception to this relates to the cost incurred in relation to a consultant called Didier Leroy in the sum of $12,533.55, for the cost of hand-carrying some software manufactured by Thales, from France to Vietnam in June 2024, in order to install it on MSN 8906. Mr Brown’s evidence was that this cost was unjustifiable – FWA could have couriered the software to its offices in Ireland and then on to Vietnam. In Mr Creaven’s cross-examination it became clear that the reason he had adopted the hand-carry route was because of the time pressure of running up against a compliance date of 14 June. He accepted that this could have been done more cheaply had FWA moved sooner. In other words, FWA left it too late to adopt a cheaper option. In those circumstances, it does not appear to me that the $12,533.55 were costs reasonably incurred, and they should be deducted from the otherwise recoverable sum.[347]Claim 1(c) was in respect of Aircraft remarketing costs engaged directly by FWA. The claim is in the sum of $277,728.50. VietJet contended there was inadequate supporting evidence for this claim, or for what it was that external/freelance marketing consultants were required to do. The difficulty with assessing this claim is the lack of evidence relating to what the marketing consultants did, and whether it was reasonable. The majority of the costs, $238,353.50, were incurred in the period November 2022 to March 2023. It then appears there were no such costs incurred until August and September 2024 (when they were incurred in the sum of $39,375.00). In respect of the first period, where most of the costs were incurred, Mr Bull’s evidence in his first report was that he was “not aware of the remarketing activities that actually took place.” Similarly, in his third report he stated he did “not have specific details of the remarketing activities that took place.” Mr Creaven’s evidence in his first statement as to remarketing did not refer to the use of third party consultants at all, rather saying that he had been preparing initial technical/marketing specifications for the Aircraft since July 2022, and then the remarketing “became active under Jonty in December 2022”. “Jonty” was a reference to Jonty Nel, Mr Creaven’s boss at FWA, not to a third party remarketing consultant. Mr Nel, explained Mr Creaven in his oral evidence, had previously been in charge of marketing for GE Capital Aviation Services (where Mr Creaven had previously worked) for the Middle East region, Africa, Turkey and Russia.[348]Mr Bull’s evidence as to what the consultants were engaged to do, and what they did, was little more than speculation. He considered it would be reasonable to engage some “low cost consultants” in around December 2022 to March 2023 to “try and create awareness for the aircraft”, but there was no evidence that was what any consultants did. Moreover, given (as FWA were elsewhere at pains to point out) the poor condition of the Aircraft on redelivery (including one of them without any engines on wing), such that it is difficult to anticipate they could have been successfully marketed in the near future, certainly without work being done on them, it is difficult in the abstract to assess whether what was in fact done was reasonable or not by way of marketing.[349]In respect of the smaller amount incurred in August and September 2024, again there was a distinct lack of detail. Again, Mr Bull was not able to explain what had been done, nor did Mr Creaven proffer evidence as to why external consultants were used rather than using the FWA expertise (including Mr Nel), or whether this had anything to do with the ultimate leases or sales of the Aircraft during 2025. Given the sparsity of evidence and detail as to what these consultants were engaged to do, and why, FWA is not able to discharge its burden of demonstrating that these costs were reasonably incurred.[350]Claim 1(d) was for FWA’s costs of travel and accommodation arising from the dispute, in the sum of $56,500. Mr Brown agreed this sum was reasonable, and VietJet accepted it.[351]As to FCAS claim 1, therefore, FWA is able to recover in respect of the NEOs, In addition to an amount to be calculated in respect of the CEOs under claim 1(a).

(d) FCAS claim 2: Aircraft parking, storage and preservation

[352]The first issue to deal with under this claim is a point of principle that arises under the terms of the sub-leases. Clause 20.7 of the sub-leases provided as follows:
“20.7 Storage Upon Return Upon redelivery but subject to twenty (20) days' prior written notice from the Sub-Lessor, the Sub-Lessee shall provide the Sub-Lessor, at the Sub-Lessee's expense, with, or procure for the Lessor, storage facilities for the Aircraft for a period not exceeding ninety (90) days on the terms set out in paragraph 14 of Part A of Schedule 4 (Return Conditions). Without prejudice to any other indemnity obligations of the Sub-Lessee in this Agreement or any other Operative Document, the Sub-Lessee shall indemnify the Sub-Lessor and the Lessor and keep the Sub-Lessor and the Lessor indemnified against any losses incurred or suffered by the Sub-Lessor or the Lessor in connection with the storing, preservation, maintenance, insurance, protection, sale or other disposal of the Aircraft during such period.”
[353]VietJet pointed out that neither the original Sub-Lessor nor FWA ever invoked a right under clause 20.7 by serving the requisite notice, such that (it contended) FWA could have no claims for parking or storage at all. VietJet contended that this was the exclusive remedy for the Sub-Lessor in respect of storage costs post-redelivery.[354]I have already considered similar points above when dealing more generally with construction of the sub-leases, and concluded that generally clauses 19-20 do not provide a comprehensive code for remedies for the Sub-Lessor in the event of termination after an event of default. There are certain parts of clauses 19-20 which do provide a liquidated damages figure payable in respect of certain losses (such as the termination sums under clause 19.3 and the 150% Rental under clause 20.4(c)). However, clause 20.7 is not equivalent to such clauses. Clause 20.7 provides the Sub-Lessor with the entitlement to request storage facilities for the Aircraft for up to (but not exceeding) 90 days after redelivery. If the Sub-Lessor makes such a request, the Sub-Lessee has to provide those facilities, or procure they be provided. However, that does not mean that if the Sub-Lessor otherwise suffers loss by way of storage costs (including those that the Sub-Lessor itself incurs to a third party) it cannot recover them under another term of the sub-lease. Clause 20.7 does not state a limit for the Sub-Lessee’s liability for any costs relating to storage of the Aircraft, nor does it fix a sum payment in respect of storage costs. It is about the Sub-Lessee having an obligation to provide (or procure) storage for this particular period of time.[355]The second half of clause 20.7 provides an indemnity against loss suffered in connection with the storage etc of the Aircraft during that (up to 90 day) period. However, that does not mean that any loss suffered in such a period might not be recovered under another indemnity, particularly given that the second half of clause 20.7 is introduced by the words: “Without prejudice to any other indemnity obligations of the Sub-Lessee in this Agreement or any other Operative Document…”.[356]In other words, clause 20.7 does not constitute an agreement that, in the absence of a request under clause 20.7 or after the 90 day period in the clause, costs relating to storage would always be for the Sub-Lessor’s account. It constitutes an agreement that, in the absence of a request under clause 20.7 or after the 90 day period in the clause, the Sub-Lessee would not have an obligation to provide or procure storage, but not that it would not have to indemnify the Sub-Lessor in respect of storage costs if such costs fall within the terms of another indemnity to which the Sub-Lessee has agreed.[357]This is supported by the terms of clause 23.1 itself, which makes it clear that it covers Losses incurred by the Sub-Lessor relating to, arising out of or resulting from (whether directly or indirectly) the “storage” of the “Aircraft, the Airframe, any Engine or any Part” and to do so “regardless of when the same shall arise (whether prior to, during or after termination of, the Lease Period)”. Costs relating to storage of the Aircraft following termination of the leasing were plainly intended to be (and are) within the scope of clause 23.1.[358]The entitlement to request storage under clause 20.7 is, as VietJet pointed out, Excluded Property and therefore not a request that FWA could have made in respect of the CEOs. However, that makes no difference to the analysis. FWA does not bring claims under clause 20.7 in respect of any of the Aircraft, and did not make, or purport to make, requests under clause 20.7. It might have done in respect of the NEO Aircraft, but as set out above that was not its exclusive remedy in respect of storage.[359]The claims under FCAS claim 2 are therefore in principle open to FWA in relation to the NEOs. I will, however, for the sake of clarity, identify the figures relating to all four Aircraft, because those are the numbers that appeared in the parties’ submissions, such that the points can be conveniently identified.[360]The claim for storage in FCAS claim 2 was split into three parts: i) Aircraft parking in Hanoi and Saigon with Habert: $1,875,523.22. ii) Aircraft parking and preservation maintenance with Vietstar: $749,075.00. iii) RDAF (Repair and Design Approval Forms) Special technical approvals (Airbus): $164,792.25.[361]In relation to the first of these (Habert), the experts agree the costs are supported by invoices, but Mr Brown and VietJet contended that certain costs were not reasonable. VietJet’s written closing identified that the costs of storing the Aircraft should be reduced by $95,050 for three reasons. i) First, it was said that there was a duplicate invoice for one day. Mr Bull agreed that there was a duplicated day charged at $770 for each of MSN 8906 and MSN 8592. Although he speculated this might have related to a part day or to some other agreement that had been reached, there was no explanation of this, and without such an explanation it is difficult to see why it was reasonable for FWA to pay the duplicate charge. This should therefore be deducted. ii) Second, it was said that storage had been charged whilst VAECO was performing maintenance (in the sum of $69,300). Mr Brown said that in his experience a reduction would normally be credited against storage charges for days spent inside the hangar, and that a refund ought to have been available where parking was unused because an aircraft was under maintenance. Again, there was no explanation why this had been charged. Mr Bull identified that there may be overlap in charges when parking was being charged by one service provider while maintenance was being performed by another, but that did not amount to an explanation why it had been charged here or why it was reasonable to have agreed to or paid it. This also should be deducted. iii) Third, it was contended that there was insufficient information to justify a particular invoice dated 6 February 2025 for $25,000 from World Fuel Services to Habert. In relation to an earlier invoice, also for $25,000 relating to an invoice from World Fuel Services to Habert, Mr Creaven had explained in his third witness statement that this was “a prepayment for Habert’s sister company Light Aviation to process the international departure permit for the 8906 Aircraft”. That was not challenged when Mr Creaven gave oral evidence. Mr Bull noted this evidence in his third report and also noted that the narrative in the invoice related to the Guernsey 2-Reg for MSN 8937, and the date coincided with the period in 2025 that MSN 8937 had departed Vietnam. He concluded, and I accept, that it is reasonable to assume that this invoice was a charge to process the departure permit for MSN 8937 (as the earlier one had been for MSN 8906). On the evidence, therefore, this was a justified and reasonable expense (in respect of each Aircraft).[362]Also in relation to the Habert costs, VietJet and Mr Brown noted that for MSN 8937, the engine nacelles were stored outside the Aircraft (at a cost of $239.68 per day) which Mr Brown said in his reports could have been avoided by their storage in the cargo compartments of the Aircraft, resulting in a deduction of $43,142 from the overall costs of storage. However, as Mr Brown accepted when he gave his oral evidence, he was wrong to have suggested that the nacelles would fit into the Aircraft’s cargo hold. They would not. He sought, instead, to advance an alternative point that, even if the nacelles themselves were too large to fit inside the Aircraft, they could have been stored with the engine in an air conditioned bay, whilst smaller components such as the thrust reversers could have been put into the Aircraft’s cargo holds, producing cost savings. However, as he acknowledged when giving his oral evidence, seeking to store them in the Aircraft without protective casing would risk damage to the parts (the thrust reversers, for example, were high value engine parts which Mr Bull said themselves cost many hundreds of thousands of dollars) and to the Aircraft itself (e.g. the door), and had they been crated for protection that would have been too large to fit into the hold. It also appears to have been the case that, prior to redelivery, after the engines had been removed, VietJet had not chosen to store such parts in the cargo hold of the Aircraft. In the circumstances, it was reasonable to store these parts outside the Aircraft, and I accept Mr Bull’s evidence that the cost incurred in this respect was reasonable.[363]The final point taken by VietJet in its written closing in relation to the Habert costs was, again in relation to MSN 8937, to point to Mr Brown’s evidence that engine 771331 could have been stored at a charge of $2,000 per month rather than $8,800 per month. He said in his report that $2,000 per month was more typical in his experience of storing engines in other parts of Asia. However, as Mr Bull pointed out, $8,800 per month was what Habert charged for that facility, and there was no evidence it would have been possible to renegotiate for a cheaper rate. Moreover, as Mr Bull also pointed out (and as Mr Brown agreed when cross-examined), this was a multi-million dollar value engine, and it was reasonable to store it in a secure and climate controlled environment, in particular given the high ambient temperature and high humidity in Vietnam. Whilst, as Mr Brown noted, the engines were also stored in hermetically sealed bags containing desiccant gel to seek to control the environment within the bay, he acknowledged in cross-examination that it was entirely appropriate also to place the engines in a climate controlled environment (although describing it as “belt and braces”). In the circumstances, I accept Mr Bull’s evidence that this was a reasonable cost of storing this engine.[364]In relation to claim 2(b) (re. Vietstar), in its closing submissions the only point relied on by VietJet was the same point as above regarding storage cost of the engine nacelles. As set out above, however, the cost of storage of those parts was reasonable.[365]Claim 2(c) concerns the cost of four engineering assessments performed by Airbus to ensure the continuing airworthiness of the Aircraft. Mr Bull and Mr Brown agreed that the claim for $164,792.25 was supported by evidence and was reasonable.[366]Insofar as a more general point was sought to be made by VietJet in relation to parking charges, to the effect that FWA should have put the Aircraft in to long-term storage rather than parked, I deal with that under FCAS claim 7 below (where it also relates to the cost of keeping the Aircraft in a flight-ready state). In summary, and as I conclude there, it was reasonable to maintain the Aircraft in a condition in which they could leave Vietnam promptly once approval to export was granted, and it was reasonable not to put the Aircraft into long-term storage.[367]As a result, the amounts claimed under claim 2 in respect of the NEO Aircraft are recoverable, subject to the deductions I have noted above.[368]Also relevant to be considered with the above are parts of FCAS claim 9, namely 9(a) and 9(b). Claim 9 was only dealt with separately in the FCAS because of the time period to which the amounts claimed there related, rather than because of any specific subject matter. Conceptually, claims 9(a) and (b) fall to be treated with FCAS claim 2 as dealing with aircraft storage.[369]These claims largely concern the parking and storage costs incurred by FWA in respect of(a) the NEO Aircraft in Alice Springs, Australia and(b) the CEO Aircraft in Ireland. As already noted, given my determinations on the issues of principle, the costs relating to the CEO Aircraft at this stage that were incurred by FWA do not fall within the indemnity, although I note for completeness that those costs (claim 9(b), relating to storage at Shannon in Ireland) of $188,959.17 were accepted by Mr Brown as reasonable. In respect of the NEO Aircraft – claim 9(a) – the claim was for costs of $619,526.09, of which Mr Brown considered a sum of $570,350.46 was reasonable.[370]The difference of $49,176 represents the shipping costs, customs fees, collection fees and shipping time charges in respect of an engine stand that was hired from (and transported from) a company in Los Angeles which was used by FWA whilst MSN 8937 was in Vietnam, to replace the engine stand that had been used up to that point to hold engine 771331, which had been a VietJet stand (and which VietJet had demanded be returned to it). Mr Brown and VietJet pointed out that a stand could have been hired from a closer location (e.g. from VietJet, or from Pratt & Whitney or Eagle Services). On the face of it, Mr Brown had a reasonable point here. There was nothing clear by way of explanation why the stand had to be one shipped from Los Angeles. There was no evidence demonstrating that shipping an engine stand from Los Angeles to Vietnam was the only option, or that there was no engine stand closer to Vietnam than Los Angeles, or that this was otherwise reasonable. In the circumstances, FWA failed to prove that this element of the cost ($49,176) was reasonable, and it should be deducted from the claim. FCAS claim 5: Loss of Aircraft maintenance and component utility[371]This claim is based upon the fact that aircraft and their components have a finite maintenance potential and utility which is consumed through the passage of time and/or through the use of the aircraft. All modern commercial aircraft need regular maintenance. The performance of maintenance tasks is driven by the number of flying hours, flight cycles and the calendar, depending on the particular part. As the aircraft is flown, and as time passes, the potential cost of the next maintenance events (as required to ensure airworthiness and compliance with regulations) rises, or at least advances in time. The converse of this is that it is possible to value the deterioration of the parts per flying hour or per flight cycle or per month by reference to their continued use and/or the passage of time by dividing the cost of each part as new by the applicable expected, or stipulated, life of the part as measured in flying hours, flight cycles or months.[372]FWA’s claim under this head related to(i) VietJet’s unlawful operation of the Aircraft following the termination date and(ii) the delay in exporting the Aircraft from Vietnam after redelivery. Both those are said to have entailed a loss of maintenance and component utility for any maintenance events that are measured in calendar time and the former also a loss through the consumption of utility by VietJet’s operation of the Aircraft. A very small element of the latter is also for lost utility of hour or cycle limited parts during non-revenue flights.[373]FWA claims for loss of maintenance and component utility for two periods: i) For the CEO Aircraft only: arising from VietJet’s unauthorised use of the Aircraft between the termination date and the redelivery date (15 December 2022). ii) For all Aircraft: arising from FWA being unable to utilise the Aircraft from 16 December 2022 to the Final Cut-off Date on 22 May 2025.[374]FWA explained that it did not claim for the NEO Aircraft for the period of time between the termination date and the redelivery date, because if it is compensated for the fact that the Aircraft were not in the Return Condition, the effect will be to compensate it for maintenance and component utility lost during that period.[375]There was no disagreement between Mr Bull and Mr Brown as to the quantum of these claims – the experts agreed the methodology for valuing such a claim and the amounts claimed (being $4,902,155.03 in total for the four Aircraft).[376]However, VietJet contended that, in respect of the CEOs for the period up to redelivery, this was misconceived. The reason FWA did not, and could not, make the claim for that period for the NEOs was because compliance with the Return Conditions would have the effect of restoring the maintenance and component utility lost during that period. But FWA did not have the Return Condition claim for the CEOs (it being Excluded Property), and so could not bring the claim for loss of component utility for that period to circumvent that. As to the claims for the period after the redelivery date, VietJet contended, where they were merely a product of the effluxion of time (as almost all of them were), they were not “Losses” at all, and so were not recoverable under the indemnities (e.g. in clause 23.1), or in any event did not arise out of any of the matters listed in clause 23.1.[377]VietJet’s objection to the claim in relation to the CEOs starts with the fact that FWA does not have the rights to the Excluded Property in respect of the CEOs. That, as I have already noted in this judgment, is important in considering what FWA can claim under clause 23.1. FWA’s claim under clause 23.1 is as a successor or affiliate of a financing party. In principle, it might be contemplated that a financing party could suffer loss in the nature of the diminished value of the Aircraft over which it has security, that diminished value being the result of the lost utility of its components through use of the aircraft (or through the passage of time). That might result, for example, in a security holder not being able to realise sufficient value in the security such that it suffers a shortfall giving rise to a loss. However, a claim on such a basis was not advanced, and nor could it be, here. First, the immediate successor to the original financing parties, FWC, sold the Aircraft (to the entities subsequently referred to as the Trustee Owners) and there was no attempt at trial to prove that the sale price would have been greater if the components had not lost the utility that is the subject of FCAS claim 5. Whilst, therefore, FWC may in theory have suffered a potential diminution in value of its security in the Aircraft by reason of the flights and the passage of time between the termination date and the date of those sales, any such loss would have crystallised for FWC at the point of those sales, and there was no attempt to prove any such loss by reference to the sale price or otherwise. FWA was able to bring a claim under clause 23.1 as a successor to FWC, or an affiliate of FWC (which itself was a successor to the original financing parties). As a successor, it cannot have suffered any greater loss than FWC. As an affiliate, it is difficult to see how it might have suffered a loss that FWC did not suffer in these circumstances, and in any event no attempt was made to explain or prove how it might have done. Second (and even if FWC could have said it suffered a loss in the way just considered), FWA took an assignment of certain rights, but did not take any assignment of the Aircraft themselves or any property in them. The Claims Assignment Agreements did not include the “Aircraft Excluded Property”. There was a subsequent assignment to FWA, in June 2022, of certain rights of redelivery and return, as explained in further detail below when dealing with the claim in conversion, but that did not include the transfer of any property in the Aircraft (which, by then, had been sold to the “Trustee Owners”). In those circumstances, it is difficult to see how FWA itself could have suffered any Loss in respect of loss of component utility in the components on the Aircraft – it did not have an entitlement to the property in the Aircraft or to their value – and no explanation was given at trial as to how it might have done. The loss claimed in FCAS claim 5 is not, like many of the other claims pursued at this trial, one represented by an actual expense or cost. It is not a “cost” or a “charge” or an “expense, nor is it a “liability” or an “obligation”, nor anything else in the list of items that makes up the definition of “Losses” in the sub-lease agreements except, potentially, a “loss”. But for it to be a loss, it must be proved as such, and as I have said there is nothing to suggest that FWA suffered a loss by way of the reduction in the loss of component utility on the CEO Aircraft.[378]Accordingly, as VietJet contends, FWA cannot bring a claim for what it claims under FCAS claim 5 in respect of the CEO Aircraft, whether for before the redelivery date or after it.[379]The position in respect of the NEO Aircraft is different because for those Aircraft FWA has the Excluded Property. It brings the claims as owner, and as the successor to the rights of the owners including to the Excluded Property, such that it has suffered loss by way of loss of component utility in the Aircraft which is less valuable (and/or will require greater or accelerated cost spent on them) as a result. Although the claim in respect of the NEOs is, for FCAS claim 5, based only on the period of time post redelivery I note that the claim under FCAS claim 5 does not result in double recovery for FWA in respect of the NEO Aircraft, despite the Return Condition claim under clause 20.4, because the Return Condition claim is based on the life used by VietJet as at 15 December 2022, and the diminution in value which is claimed under that claim is for the diminution in value up to 15 December 2022, and not beyond. Accordingly, the sums awarded under the Return Condition claim do not reflect loss of component utility arising after 15 December 2022. and very largely therefore based only on the loss of component utility through the effluxion of time, that does not mean that FWA has not thereby suffered a loss. It suffered that loss as a result of the time the Aircraft had to spend in Vietnam due to the need to maintain and repair them and to obtain what was required in order to export them, such that the Losses related to, arose from or resulted from (directly or indirectly) at least the redelivery, the possession, the maintenance, the repair, the testing and/or the export, of the Aircraft within clause 23.1. Accordingly, FWA succeeds in its claim under FCAS claim 5 in respect of the NEO Aircraft, which amounts to $538,095.64 (in aggregate for both NEO Aircraft). FCAS claim 6: Aircraft re-registration and regulatory compliance[380]Under FCAS claim 6, FWA claims(a) the costs of transferring the Aircraft to the Guernsey registry,(b) engineering work and parts required to transfer the Aircraft Registration,(c) the cost of CAMO services, and(d) the costs of an EASA regulatory compliance assessment performed by Airbus.[381]The experts agreed that the invoices disclosed supported the amounts being claimed and the parties, through their experts, agreed that the total sum of $716,415.59 was reasonable. The experts had agreed, in the joint memorandum, a reduction of $17,000 from the claim previously advanced by FWA, which brought the total to $716,415.59, and that is the total that was advanced by FWA at trial.[382]The costs claimed under FCAS claim 6 can only be claimed by FWA in respect of the NEO Aircraft, not in respect of the CEO Aircraft, for the reasons I have already explained at paragraphs ‎99 to ‎106 above.[383]However, VietJet went further and contended it was not liable for any of the amounts claimed under FCAS claim 6. VietJet argued that there was no obligation upon the Sub-Lessee to arrange or pay for the Aircraft to be inspected for, or issued with, certificates of airworthiness in another jurisdiction. It noted there were obligations under clause 20: clause 20.1(a) and (b) required the Sub-Lessee to procure that the Aircraft be registered with the CAAV, and to procure that the Aircraft be in a condition enabling it to be duly certified as airworthy by the CAAV; clause 20.5 provided an obligation to “cause the Aircraft to be deregistered” and to provide an ECOA, but only upon request (and it is accepted no request was made under that clause). Those obligations were, said VietJet, FWA’s exclusive remedy for the NEO Aircraft (and were Excluded Property and therefore not available in respect of the CEO Aircraft). VietJet said it was FWA’s choice to re-register the Aircraft in Guernsey, and that there was no obligation upon the Sub-Lessee to ensure the Aircraft satisfied any particular requirements of any new state of registration chosen by the Sub-Lessor after redelivery. It contended that, as a result, no Loss had been suffered by FWA.[384]However, as I have already dealt with, clause 20 did not provide an exclusive regime in terms of remedies. The fact that there is an obligation under clause 20.5, for example, on the Sub-Lessee to cause the Aircraft to be deregistered on request, does not mean that costs incurred by the Sub-Lessor in relation to de-registration are not recoverable under the clause 23.1 indemnity. Moreover, the fact that there may not have been an obligation upon the Sub-Lessee to arrange for re-registration in another jurisdiction does not affect the point. Clause 23.1 provides an indemnity if an Indemnitee incurs cost relating to, arising out of or resulting from the process, noting that de-registration and re-registration (amongst other applicable matters) were specifically listed in clause 23.1.[385]Moreover, as to the facts, FWA needed to re-register the Aircraft outside Vietnam as a necessary step to enable the Aircraft to be managed, maintained and ultimately exported from Vietnam. I have already set out above why that was so, in summary because of VietJet’s lack of cooperation in terms of saying it would not provide CAMO support (or issue FWA’s work orders) post redelivery, because Vietnam does not recognise third party CAMOs, and because work orders on Vietnamese registered aircraft could only be issued by the local operator maintaining airworthiness control i.e. a Vietnamese airline. FWA had no realistic alternative other than to deregister from the CAAV, re-register in Guernsey, and engage CAE Parc as CAMO. The costs of doing so are recoverable under clause 23.1 in respect of the NEO Aircraft.[386]The only other point raised in VietJet’s closing submissions was to note that Mr Brown had said there was an overlap between claim 6(c) (CAMO services under FCAS claim 6) and claim 1(a) (external technical consultants). He said there was some duplication between the technical consultants in Vietnam and the CAMO in Dublin or Singapore. VietJet’s submission was, therefore, that FWA should only recover in the sums set out at paragraph 5.6 of Mr Brown’s third technical report over and above the cost of the CAMO. The figures at that paragraph of Mr Brown’s third technical report constituted what Mr Brown said was reasonable in respect of recovery under claim 1(a), which I have already dealt with above, and I have agreed with Mr Brown and VietJet that it was Mr Brown’s figures which should be awarded to FWA, not their own. As a result, this point has already been dealt with and does not arise to any further effect here.[387]FWA claims here the costs it says it has incurred in returning the Aircraft to flight ready condition. It includes not only FCAS claim 7, but also FCAS claim 9(c)-(g) which were included as a separate FCAS claim simply because of the time period in which the costs were incurred.[388]These are claims in respect of which, for the reasons I have explained above at paragraphs ‎99 to ‎106 above, FWA are unable to recover an indemnity in relation to the CEO Aircraft. As noted above, however, when giving overall figures for each part of the claim, I will generally refer to the figures for all four Aircraft, because that is the way that the points were presented at the trial.[389]As to the NEO Aircraft, VietJet said these costs were recoverable under clause 20.4 rather than 23.1, but accepted that insofar as the claims were for the actual costs reasonably incurred of putting the NEO Aircraft in the Return Condition, FWA was entitled to claim them under clause 20.4 (unless FWA elected instead for its claim for diminution in value).[390]In relation to a number of the parts of this claim, the experts agreed the claim was supported by evidence and was reasonable. That applies to FCAS claim 7(c) (for $1,205.63) and to FCAS claims 9(c) ($199,996.26), 9(d) ($26,741) and 9(g) ($2,226, although that was wholly incurred in relation to the CEO Aircraft). In the circumstances, I do not need to say anything more about those claims which, insofar as they relate to the NEO Aircraft, are recoverable by FWA. I deal with the outstanding parts of FCAS claim 7 and claim 9 below. Claim 7(a)[391]This was a claim for the costs of maintenance largely carried out by VAECO, which was the MRO (Maintenance, Repair and Overhaul organisation) engaged by FWA to provide maintenance support for the return to operation of the Aircraft. There was also an element of the claim for maintenance performed to MSN 8906 by AIROD in Malaysia, en route to Australia. The claim was in the sum of $3,009,055.32. Whilst there was no dispute that the labour rate that VAECO charged (at $35 per hour) was reasonable, Mr Brown raised a number of issues as to the reasonableness of certain elements of the costs incurred. His overall view was that the reasonably incurred costs amounted to $1,922,966.96. A number of points were made by VietJet/Mr Brown in support of that.[392]VietJet and Mr Brown contended that FWA should not be entitled to recover the costs of maintaining the Aircraft in a flight-ready state, and parked, rather than being placed in long-term storage, where (as it contended) there was no immediate prospect of the Aircraft leaving Vietnam. However, Mr Bull explained that when an aircraft comes out of long-term storage, as a consequence of its lack of use, it can generate a significant number of defects, which require time and hangar space to remedy. That can potentially increase cost and time taken to again get the aircraft ready for flight. Given the difficulties encountered by FWA in predicting when export approval would be granted, the fact that it became apparent that test flights may be required before it was granted, and the lead time to get an aircraft out of long-term storage and into flight-ready condition, it was reasonable to maintain the Aircraft in a condition in which they could leave Vietnam promptly upon approval to export being granted.[393]Mr Brown criticised the level of detail provided on some of the invoices supporting this claim, and VietJet suggested FWA had not discharged its burden of proof as a result. However, Mr Bull had analysed the items that made up this claim, explaining his methodology, and the conclusions he had reached. He acknowledged the limitations in what he had done in his third report, explaining he had not attempted to analyse the maintenance status of each Aircraft at every relevant point during the 27 month period of the claim (i.e. he had not sought to assume the role of the CAMO to try to determine what tasks were required in the context of the situation at the time and the decisions that would be necessary); and he had not looked at every single work order or audited the complete technical records to attempt to match each task to each invoice. As he went on to explain in his report, seeking to eliminate those limitations would require a daily log setting out exactly what was known by whom, the availability of the maintenance hangars, any limitations raised by VAECO in terms of capacity, etc, which he would not expect to have for a period spanning more than 2 years, and it would require weeks of work. It would, in short, he concluded be a disproportionate exercise. That appears to me to have been a perfectly reasonable conclusion to draw. Rather, he set out and performed a methodology seeking to verify to a practical and proportionate extent the reasonableness of the sums incurred. For example, for the first claim period, he randomly selected work orders and determined that they were the type of tasks he would expect to see being performed at that time; for the second claim period, he wrote to FWA and requested the certified aircraft documents to ensure that the work had physically been carried out, which he was able to confirm; and for the third claim period, as the claim amount for that period had increased significantly, he asked FWA for the CAMO work scope/work orders for the largest checks performed to MSN 8577, MSN 8592 and MSN 8937, to verify that the work had been performed and certified by VAECO’s engineers, which he confirmed he had done. Based on his analysis, he assessed the claim amount as reasonable.[394]It must also be recalled, as Mr Bull also noted in his evidence, that it was extremely unlikely that a team of experienced technical managers, plus the CAMO provider and technical consultants, would schedule and pay for unnecessary or unreasonable maintenance, given the obvious cost implications of doing so. In the circumstances, Mr Bull’s exercise was sufficient to demonstrate the reasonableness of the work done and the costs claimed.[395]As a related matter, Mr Brown complained that he had not been provided with the full complement of tally sheets for the VAECO invoices. However, he accepted that tally sheets had been disclosed in the litigation, and that he had never asked VietJet’s solicitors to obtain them. That is not a basis for reducing the claim.[396]Mr Brown also contended that much of the VAECO work appeared to have been conducted to prepare the Aircraft for test flights and ferry flights which were either unnecessary or were cancelled, such that he considers amounts related to that work should not be recovered. However, as referred to under FCAS claim 8 (below), it was not unreasonable for FWA to prepare for and incur costs for those flights, even where they ultimately had to be cancelled or (in respect of the test flight for MSN 8577) had to be repeated.[397]Mr Brown also made a point in his oral evidence that aircraft washing could have been deferred until the Aircraft were being readied for ferry. This was not relied upon in VietJet’s written closing and was in any event not a good point. He had already accepted in his evidence that aircraft cleaning is a required maintenance task under the Aircraft Maintenance Manual (“AAM”) and that the 50 manhours spent on it was perfectly fine.[398]In summary, there is no reason to reduce the amounts claimed under claim 7(a), and in respect of the NEO Aircraft the sums are recoverable in full. Claim 7(b)[399]This was a claim for aircraft parts and components provided by Airimex, which was FWA’s provider of parts and parts logistics in Vietnam. The claim is in the sum of $2,355,871.38. Mr Brown’s opinion was that only $1,650,000 was reasonable.[400]The first point to note is that the experts agreed that the invoicing system adopted by Airimex was confusing, and caused considerable difficulties in reconciling the costs incurred by FWA. Mr Brown explained in his second report that he had been unable to reconcile all the amounts claimed with the invoices provided.[401]Mr Bull highlighted in his reports the difficulties he had experienced in following Airimex’s internal paper trail of purchase orders, proforma invoices and statements, and matching them to the invoices. Mr Bull explained that matters were complicated in part because Airimex required that FWA maintain with them a “float” against which the cost of components were subsequently deducted by Airimex. Airimex would raise an invoice for an estimated repair or purchase amount, which would be deducted from the float, and also would invoice separately for administration fees, banking charges, and retrospective adjustments for the differences between the actual and estimated amounts; the “float” amount was also periodically invoiced to maintain a positive balance. This initially caused difficulties because when the experts first looked at this exercise the work on the Aircraft was still on-going such that the float was still being maintained by Airimex. However, by the time of the experts’ final reports, all the work had come to an end, such that Mr Bull explained he had then found it easier to assess the position.[402]Mr Bull explained that, in relation to the third period for the claim (which contained most of the value of the claim), he made a series of requests to FWA, received approximately 1,300 documents, and worked through the list of purchase orders identifying supporting documents. He said that this allowed him to gain confidence that the underlying documents did not conflict with the information he had previously been provided with or the primary invoices and purchase orders. In this way, he reviewed 40 of the 419 parts included in the claim. He also concluded from his analysis the following:
“What became clear from my analysis, and the reason for the unusually large number of invoices, purchase orders, bank charges etc. is that Airimex’s role was purely one of agent. It manages the process of acquiring or repairing parts and passes the vendor’s cost directly on to is customer but then charges separately for its management and administrative services, the bank charges it incurred, the cost of transportation, custom charges and in fact every associated cost for each part. In my experience, it is likely to be one of the most overcomplicated and inefficient ways of charging a customer for aircraft parts that I have come across. My view is that it would also be a very labour-intensive and frustrating way of procuring parts for the customer.”
[403]He accepted in his report that he had not audited every invoice, and had not audited and correlated all 1,300 of the underlying documents. He also had not attempted to check every invoice against the agreement with Airimex to check whether the fee cap had been applied in each case or whether FWA had otherwise been overcharged. When cross-examined, Mr Bull accepted that there were charges in the material that he could not “trace through”. In particular in relation to the additional charges, he accepted that it was not possible to reconcile them and work out why all the charges were justified by reference to the particular parts.[404]One example invoice identified by Mr Brown was dated 1 December 2023. It started by saying the invoice was to debit a “service fee”, and gave a purchaser order number. It then simply stated “repair cost” of $29,900, which was said to have been paid by a “deposit”, and additionally charged an admin fee of $2,000 and a bank fee of $40. It was not possible to discern from the invoice what the repair cost related to. Nor was it clear whether the admin fee related to this repair cost, or to something else, or to what the bank fee related (given that the repair cost had apparently been met from the deposit). There was a list of purchase order numbers and details supplied by FWA in the FCAS at tab 7b.1, which identified that the purchase order number in question covered 5 parts, on two of the Aircraft (MSN 8592 and MSN 8906) in the total amount of nearly $100,000. It was not possible to tell which of those parts the invoice related to – none of them was for $29,900 individually, nor could the sum of $29,900 be reached by adding together one or more of them. Mr Brown also said he had sample checked some of the more expensive items. He found three that reconciled fully, and two which did not where the numbers did not add up to the amount claimed.[405]It is clear that the task handed to the experts in relation to the Airimex invoices was far from straightforward. Mr Bull clearly sought to engage with it as best he could, and the limitations on the exercise that he conducted were fairly acknowledged by him. Ultimately, what emerged from his evidence was that he was confident in the cost of the parts themselves, but had found the trail in respect of the other fees and charges more difficult to follow.[406]It appeared from the information and material presented in the FCAS that the costs of the parts themselves was $1.823 million, which Mr Brown agreed was the amounts incurred for the parts. This set out the invoices for the vendor costs, i.e. the costs charged by the provider or the repairer for the part in question. It set out a list of the individual parts included in the claim, and a description of the transaction (e.g. a repair, an overhaul, an exchange, etc), and the reason for the transaction (e.g. a defect), and Mr Brown accepted that the parts had been fitted to the Aircraft.[407]The audit trail for the parts was, therefore, far from perfect. However, FWA had sought to demonstrate what had taken place, and Mr Bull had checked the documents in an appropriate manner. He concluded that the costs incurred were reasonable. Although Mr Brown had legitimate complaints about how the material was presented (which was largely down to the way in which Airimex dealt with invoicing), he had not been able to identify any examples of work which was unreasonable, nor did he suggest that the cost of the parts themselves was unreasonable. As Mr Bull explained in his oral evidence, there were $1.8m worth of parts, for which all of the invoices were available, and which ultimately had been paid by FWA (although marrying through under which Airimex invoice FWA had paid the cost for each part was a struggle).[408]However, the additional charges remained difficult to follow, and there was no consistent explanation as to how they had been applied or on what contractual basis. Mr Bull accepted this had caused difficulties. Mr Brown pointed out that the contract provisions he had seen did not appear to allow Airimex to recharge bank fees to FWA (which themselves amounted to nearly $60,000). As he also said, it was difficult to follow what the admin fees related to, and he noted that on one invoice the admin fee was over the cap that he understood had been agreed. Moreover, as appeared when Mr Shah KC (who appeared for FWA) showed him what appeared to be some pages from a contract with Airimex, there was no complete copy of that contract available. FWA accepted, in its closing submissions, that the fact that bank charges were not expressly provided for in the Airimex contract might justify a modest deduction from the claim (which FWA suggested should be not more than $60,000), but did not seek to explain the basis on which other fees including the admin fees had been levied and to what extent they were reasonable.[409]The upshot is that it is clear from the material and the expert evidence that the parts in question cost $1.823 million, which was a reasonable cost for the parts. On the other hand, there was no good explanation that supported the claim for the other fees, which neither expert could follow through the various invoices and charging trails, and the material supporting the basis for the charges was thin at best. In its closing submissions, FWA suggested that if there was to be a deduction to reflect the difficulties here, the award should be no less than the $1.823m for the parts plus “a reasonable allowance for shipping, handling and associated charges”. However, it was not suggested what figure or percentage would be reasonable, and no reference was given to evidence identifying what it might be in these circumstances in respect of these parts. It was FWA’s claim to present and support, and in respect of these other sorts of fees, they did not adequately do that. It does not appear to me, in those circumstances, that I should add a figure to the $1.823 million for that purpose.[410]Accordingly, under claim 7(b), FWA succeed in respect of the NEO Aircraft, but only to the extent of the cost of the parts. The figure of $1.823 million was for all four Aircraft, and I will leave it to the parties to agree what the relevant figure is for the two NEO Aircraft. Claim 9(e)[411]This was a claim for customs clearance and agent fees incurred by FWA in Vietnam. The claim is for $48,600. The experts agreed that the claim was supported by invoices from “SEKO Logistics / SEKO Worldwide” that correlated to the amount claimed. However, Mr Brown did not consider the total amount to be reasonable.[412]There were four invoices. Two of the invoices were for fees of $1,200 per Aircraft for each of MSN 8577, MSN 8592 and MSN 8937. Mr Brown said he had insufficient information to determine the exact services provided, but that these costs appeared to be for customs clearance and, he assumed, they were for compilation of an aircraft documentation dossier and presentation to the customs authority for obtaining the customs export certificate. He thought this was a reasonable cost for the work which it appeared to deal with.[413]However, the position in respect of the other two invoices was not agreed (although neither expert was asked any questions about this in cross-examination, and neither party addressed in their written or oral closing submissions). Those invoices charged fees of $15,000 per Aircraft (for each of MSN 8577, MSN 8592 and MSN 8937). Mr Brown said he had insufficient information to consider what the costs were for and if they were reasonable. He also noted that Mr Creaven’s evidence stated that Habert was an organisation experienced in import and export of aircraft in Vietnam and had been engaged by FWA (and I have referred to them elsewhere in this judgment), but Mr Brown had no evidence or information to explain why SEKO was engaged or what role they performed.[414]Mr Brown was right to raise those points. It was unclear what these invoices were for. Mr Creaven gave no evidence about the role of SEKO. Mr Bull recorded the basic details of the invoices in the joint memorandum (such that they were addressed to FWA, referred to the Aircraft and described the services provided as “customs clearance/agency fees” and associated VAT), whilst also noting that it was not clear to him whether the costs related to parts shipment or fees associated with the export of the Aircraft. He asked FWA what they related to, and received the answer that SEKO Logistics was a company retained by FWC to liaise with Vietnam customs for the export of the Aircraft from Vietnam (referring to the “final customs release prior to each aircraft’s departure from Vietnam”) and that it has an office in Ho Chi Minh City. Mr Bull then fairly recorded in the joint memorandum that he had no knowledge of the requirements associated with exporting an aircraft from Vietnam, but said that given the fees were incurred as part of exporting the Aircraft, he thought it would be reasonable that the amount formed part of the claim.[415]I do not regard that as sufficient. There was no evidence about what these costs were for or why they were incurred. The information that was supplied to Mr Bull (effectively as additional instructions, not given in evidence) was minimal, and did not explain why these costs were incurred or how they related to other costs incurred in respect of customs clearance for the Aircraft. That being the case, there is nothing on which to base a finding that they were reasonably incurred. In the circumstances, the $45,000 is not recoverable, though FWA can recover those fees agreed by Mr Brown to be reasonable for the NEO Aircraft (MSN 8937) i.e. $1,200. Claim 9(f)[416]This was a claim for $113,575 in respect of the cost of work to the main and nose wheels of MSN 8906. Mr Brown initially disputed the reasonableness of the claim on the basis that it could have been completed as a line maintenance task, but following disclosure of further documents from Airbus which he agreed showed that was not possible, he agreed that the costs were reasonable. He confirmed in his oral evidence that he accepted these costs as reasonable. Accordingly, they are recoverable by FWA. FCAS claim 8: Non-revenue flights and Aircraft insurance[417]This was a claim for costs FWA contended it had incurred in: i) Claim 8(a): conducting non-revenue flights, namely maintenance check flights, demonstration flights required by the CAAV, and ferry flights. Maintenance check flights are flights that are necessary to maintain an aircraft in compliance with its maintenance programme by resetting task intervals counted from the last flight and to avoid accumulating overdue tasks which would necessitate maintenance in a hangar. The claim was for $1,744,288.39. ii) Claim 8(b): insuring the Aircraft. The claim was for $1,369,089.86.[418]VietJet disputed the recoverability of these items in principle, on the same lines as the other claims, and for the reasons I have already given those arguments fail for the NEO Aircraft, And although VietJet suggested that these losses did not arise out of any of the matters listed under clause 23.1, clearly they did e.g. claim 8(a) under “export” and/or “operation” and/or “maintenance” and/or “testing”; claim 8(b) under “insurance”. but the sums are not recoverable in respect of the CEO Aircraft. For the same reasons as in the preceding sections, however, when considering quantum below I generally refer to the global sums for all four Aircraft.[419]The experts agreed that the sum claimed under claim 8(b) ($1,369,089.86) was a sum supported by the evidence and was reasonable. Insofar as that related to the NEO Aircraft, it is therefore recoverable by FWA.[420]As to claim 8(a), VietJet and Mr Brown took a number of points on the reasonableness of the costs incurred. They contended that a reasonable sum under this claim was $940,000.[421]First, VietJet contended, in respect of the maintenance checks flights, that FWA should not be able to recover the costs of such flights where there was no immediate prospect of the Aircraft leaving Vietnam. This was a similar point as one made under claim 7(a) (dealing with the costs of maintaining the Aircraft in a flight-ready state), rather than placed in long-term storage, and fails for the same reasons as set out above in relation to that claim. It was reasonable to maintain the Aircraft in a condition in which they could leave Vietnam promptly upon approval to export being granted.[422]Second, VietJet contended that ferry flights with a total cost of $335,648 were cancelled, and that the costs incurred in respect of those flights were irrecoverable as they were incurred without FWA ensuring that customs and departure clearance had been obtained. However, the Aircraft had been made ready for departure at a time when FWA reasonably expected clearance was imminent. Mr Creaven explained in his second statement, and in an email to Mr Bull dated 17 September 2024, the reasons for the arrangement and cancellation of flights, largely due to the difficulty in obtaining customs clearance and in lining up the approvals for overflight clearances for countries enroute and landing clearances, and Mr Bull’s view (which was not challenged when he gave evidence) was that these were reasonable. The costs of these flights were not down to failure on FWA’s part, but to the difficulty of exporting the Aircraft from Vietnam in the circumstances I have described earlier in this judgment.[423]Third, VietJet contended that the ferry flight of MSN 8906 to Alice Springs was inadequately planned, which (it said) led to its being stranded in Malaysia for a week, which increased the cost. However, as Mr Creaven explained in his second statement, the original plan to fly MSN 8906 to Ireland was changed because of difficulty in obtaining overflight clearances for countries such as India and Myanmar (which would be time-limited), which would have delayed the departure date from Vietnam. Once in Malaysia, FWA applied for permission to fly MSN 8906 to Alice Springs (to where it flew once some associated administrative issues had been satisfied, such as finalisation of the maintenance agreement with APAS, as noted in Mr Creaven’s email to Mr Bull dated 17 September 2024). As Mr Bull explained in his third report, based upon information provided by Mr Creaven, the routing was a deliberate risk mitigation decision, since it “only involved one entry/landing permit (Malaysia) whereas the alternative contemplated multiple countries with time limited overflight clearances which could have delayed the Aircraft leaving Vietnam, which was the priority.” In the circumstances, the costs were reasonably incurred.[424]Fourth, VietJet contended that FWA conducted a test flight for MSN 8577 at the request of the CAAV without checking the procedure, and therefore had to repeat it (with the CAAV present), such that the cost of the second flight should fall on FWA as it was caused by its own failure. This cost is not recoverable in any event, as it relates to one of the CEO Aircraft, so the point does not arise. But, if it had arisen, this cost would have been recoverable – the process in obtaining approval from the CAAV and the test flights that were required were, as Mr Brown accepted, “highly unusual” and it was not a routine procedure for which an established protocol existed. The fact that there ended up being two flights was a result of the unprecedented situation facing not only FWA but also the CAAV, not as a result of any failure by FWA.[425]Fifth, VietJet noted that Mr Bull had accepted that it would have been possible to change the way the Aircraft were stored and to avoid the cost of planning and cancelling flights if FWA had understood the amount of time it would take to export the Aircraft, and also contended that FWA pursued an unreasonable strategy to export the Aircraft from Vietnam, with the result that the departures were delayed and the costs increased. However, as I have explained earlier in this judgment, I do not find that FWA’s strategy for export was unreasonable. They were confronting an unprecedented situation in Vietnam, made more difficult by the lack of co-operation from VietJet (and, indeed, VietJet’s attempts to interfere with the process). The delays in the export of the Aircraft from Vietnam are not to be laid at the door of FWA. Although it may have been possible to do things differently if FWA had known how things would turn out in relation to their attempts to export, that does not mean that what they did do (without the benefit of hindsight) was not reasonable; it was.[426]Sixth, VietJet said that FWA claims for the cost of enough fuel to fill six aircraft, which was excessive, based on an observation made in Mr Brown’s report. FWA noted in its written closing submissions that this point had not been put to Mr Bull. In any event, this appears to be linked to the suggestion that the test and maintenance flights were excessive, which I have rejected above. There is nothing to conclude that the fuel was not actually used. The costs are recoverable (for the NEO Aircraft).[427]Seventh, VietJet said that a payment of $25,000 to Habert was insufficiently explained and unjustified. However, as I have already noted at paragraph ‎361.iii) above, this was explained by Mr Creaven in his third witness statement, as relating to the international departure permit for MSN 8906. As with the similar payment that appeared to be for MSN 8937 considered above, this is recoverable.[428]As a result, this claim insofar as it relates to the NEO Aircraft, is recoverable by FWA. Lost Rental Claims Whether the lost rental claims are recoverable[429]FWA claims under clause 23.1 of the sub-leases for the lost rent it says it suffered for the Aircraft in the period up to the cut-off date for its claims of 22 May 2025. It claims lost rent for the NEO Aircraft starting from the redelivery date, and for the CEO Aircraft from the termination date. It made clear in its closing submissions that this was not a claim for damages for breach of contract, but a claim under the clause 23.1 indemnity “for rental that FWA lost out on as a result of not being able to lease the aircraft following their redelivery” (and, for the CEO Aircraft, before redelivery).[430]That being the case, it was dependent upon FWA establishing it had suffered “Losses” within clause 23.1. The only part of the definition of “Losses” potentially applicable would be “losses” (other terms such as “costs, charges, expenses,” etc being inapplicable), which was not further defined. VietJet contended FWA was not able to establish it had suffered any loss by way of loss of rental, because it had already been fully compensated for any such loss by way of the award to it of the Termination Sums.[431]In particular, the Basic Termination Amount (for the NEOs) and the Termination Value A (for the CEOs) were amounts that had been calculated (in the terms of the leases and sub-leases) to correspond to the amount repayable by the Lessors to the lenders on the termination date, i.e. the principal balance outstanding as at that date, which corresponded to the sum of the future rental payments under the leases insofar as they represented repayment of principal under the loans. In other words, these termination amounts constituted accelerated receipt of the balance of the rental payments (at least insofar as those payments reflected repayment of the loan principal, rather than interest), up until the date of the Sub-Lessee’s purchase option. (There is also payable under the terms of the sub-leases the A Termination Amount (for the NEOs) and the Termination Value B (for the CEOs), albeit in this case FWA were not able to claim the latter due to it being Excluded Property that FWA had not acquired). The result, said VietJet, was that FWA had suffered no loss by way of future rental from the date of termination – that loss was dealt with by payment of the termination sums (in particular, the Basic Termination Amount and the Termination Value A).[432]The difficulty with VietJet’s analysis is that, under the terms of the sub-leases, the Sub-Lessor was entitled to the Termination Sums and to the Aircraft in the Return Condition. If the Aircraft had been returned in the Return Condition, it could have been leased out and the Sub-Lessor obtained further rent from a new lessee as a result. That was the deal struck in the contract – that the Sub-Lessor obtained the termination sums and use of the Aircraft over the remaining period of the lease, notwithstanding the early, rolled-up payment of future rent from the Sub-Lessee.[433]The loss suffered by FWA was a loss of rent from a new lessee, and that loss related to, arose out of or resulted from (directly or indirectly) one or more of the indemnified acts under clause 23.1(1), including export (because of the time it took to export the Aircraft) and/or condition, maintenance and/or refurbishment (because of the time taken to deal with the repairs and maintenance that were required).[434]Indeed, the existence of clause 20.4(c) suggests that the Termination Sums were not intended to compensate for loss of use of the Aircraft following termination of the sub-leases. Under that provision, additional Rental was payable for the period of time between termination and redelivery, even though the Termination Sums were also payable.[435]Moreover, clause 20.4(c) itself does not exclude the Sub-Lessor’s ability to make a claim for loss of rent under the clause 23.1 indemnity, at least insofar as it claims for a period of time outside that dealt with under clause 20.4(c). The entitlement under that clause is expressly stated to be without prejudice to the Sub-Lessor’s other rights and remedies under the sub-lease, and is not intended to exclude any remedy that might be available under clause 23.1. It does not purport to provide an exclusive remedy for lost rent claims, but rather provides a liquidated damages remedy for the particular period of time with which it deals (namely, between termination and redelivery).[436]Thus the loss rent claim is in principle recoverable in respect of the NEOs. The position is different, however, in respect of the CEOs. i) FWA claims under clause 23.1 in respect of the CEOs for the period starting on the termination date. However, as set out above, clause 20.4(c) provides a liquidated damages remedy for that period to deal with the fact that the Aircraft had not yet been redelivered. As I have already set out (at paragraphs ‎95 to ‎98) above the parties cannot have intended that the Sub-Lessor could recover a different sum under clause 23.1 for loss of rent than that provided under clause 20.4(c), which fixed the sum. Moreover, that is a sum which is due to the Sub-Lessor, and which the financing parties could not claim, as clause 20.4(c) is Excluded Property. The parties cannot have intended that a financing party could claim loss of rent (if it could otherwise prove it had suffered such a loss) for that period under clause 23.1, because to do so would lead to a double claim to lost rent for the same period (which cannot have been intended). The Sub-Lessor has its claim under clause 20.4(c). The fact that it has not sought to assert that claim is nothing to the point – the contract must be coherent whether that claim happens to have been brought or not. In respect of clause 20.4(c), it is the exclusive remedy under the sub-lease for a loss of rent claim in the period it covers. FWA cannot bring a claim for loss of rent pre-redelivery under clause 23.1. ii) In terms of the period post-redelivery, in respect of the CEOs, FWA has not suffered any loss within clause 23.1 for the reasons I have already dealt with above (paragraphs ‎99 to ‎107). FWA, as an affiliate or assignee of a financing party (where the CEOs had been sold by FWC in January 2022), did not suffer the loss of not having the CEOs available to it to fly and generate income. The fact that FWA later came to own the Aircraft through the declarations of trust does not generate for it a loss that it can claim under clause 23.1.[437]The result is that FWA has no claim for lost rental in respect of the CEO Aircraft. Lost Rental Claims - quantum[438]The claims, insofar as they can be brought, are for lost rent starting on the date of redelivery of the Aircraft, 16 December 2022. Evidence as to the appropriate market lease rates for the Aircraft at those dates was given by each of the aircraft leasing experts, Mr Kelly (for FWA) and Mr Brown (for VietJet). Both parties approached this on the basis that the rates identified by the experts constituted the amount of loss (and VietJet did not suggest that any subtraction ought to be made to it to reflect, for example, running costs of the Aircraft). Although I have held, above, that the claim is not available to FWA in respect of the CEO Aircraft, I will set out the position on the evidence for both the CEOs and the NEOs, for completeness, and in any event much of the evidence was common to both.[439]The experts’ figures, for monthly lease rates at the redelivery date, were as follows: i) Mr Kelly: $243,200 for the CEOs, $324,000 for MSN 8906 and $305,200 for MSN 8937. ii) Mr Brown: $170,525 for the CEOs, $250,500 for MSN 8906 and $252,417 for MSN 8937. These were the figures given by Mr Brown on the basis of the NEO Aircraft being returned in accordance with the Return Condition, which VietJet contended in its written closing submissions were the most relevant to use for this purpose.[440]The main driver of the gap between the rates identified by the two experts is their differing views on the impact of the Covid-19 pandemic on the aviation industry and, in particular, lease rates.[441]In relation to their starting points, both experts referred to the AVITAS published lease rates, and then made adjustments. As I have already noted, AVITAS is an aviation consulting company and publishes one of the industry standard value references for commercial aircraft. Mr Kelly is CEO and Chief Appraiser at AVITAS.[442]In relation to the market conditions at the material time, the short point is that Mr Kelly did not make any adjustment to the AVITAS lease rates on the basis that those rates already accounted for market conditions. Mr Brown, on the other hand, applied adjustments. He took the view that the detrimental impact of the Covid-19 pandemic on aircraft leasing rates was not adequately reflected in the rates published contemporaneously by AVITAS, and for that reason applied a 15% discount to those rates as at the redelivery date.[443]However, that discount was not justified. Mr Kelly explained in his evidence how the AVITAS rates were compiled, and it was clear that the market conditions, in particular the impact of the pandemic, were factored in to those rates.[444]Both experts recognised that transaction data was not publicly available, such that identifying what was actually happening in the market required sources. Mr Kelly explained that AVITAS is one of the largest aircraft appraisal companies in the world, providing AVITAS with access to up to date information and data. They appraise, he said, over 8,000 aircraft a year. Through their appraisal work, they tend to obtain details of transactions or proposed transactions, for example if a client is asking AVITAS to provide a leasing value opinion they will tend to provide the lease rates or proposed lease rates to AVITAS. AVITAS are also, through that work, in constant contact with senior individuals in the airlines and leasing companies, with whom he explained they trade data on a confidential basis. Whilst some criticism was levelled at Mr Kelly for failing to be more transparent in relation to precisely what data was used by AVITAS to calculate their lease rates, it was understandable that AVITAS do not publish individual transaction data, which is subject to confidentiality obligations, and that Mr Kelly was not able to go further in this respect in his reports.[445]Mr Brown’s additional 15% discount to the AVITAS lease rates appeared overly pessimistic. He referred to a number of accounts and reports from the time noting that the market had not yet fully recovered in the second half of 2022. However, the AVITAS rates did not ignore the pandemic, they were at a discount to pre-COVID levels, as he recognised. The issue between the experts was how much of a discount should have been applied. Whilst Mr Brown said that he had taken into account information available now, which had not been available to AVITAS at the time, it was not clear how such information had been factored into a calculation, and it was difficult to see where Mr Brown’s additional 15% came from, in terms of figures.[446]The additional discount Mr Brown proposed did not reflect the assessment of market conditions prevalent in the market at the time, or the particular type of aircraft in issue here (namely, narrowbody aircraft which could operate on domestic routes). Financial reports of aircraft lessors explained that the leasing market had begun to recover from the impact of the pandemic in 2021, with increased demand for leased aircraft from the second half of 2021. For example, AerCap’s annual report for the year ended 31 December 2020 had recorded that air travel had increased since the low points experienced earlier in the year, and that the timeframe for recovery of domestic travel was generally expected to be more rapid than for international travel. The AirLease annual report for the year ended 31 December 2021 noted the impact of the pandemic on demand, “most particularly on widebody aircraft” and went on to state that “in the second half of 2021, we experienced increased demand for our aircraft … [along with rising interest rates and inflation] providing catalysts for a rising lease rate environment.” AerCap’s annual report for the same period recorded that air travel had increased since the low points experienced earlier in the year.[447]As was evident from those reports, and the other material relied on by the experts, domestic markets were expected to, and did, recover more quickly than international markets and, related to that point, the lease rates for narrowbody aircraft (such as the A321) were not as affected as those for widebody aircraft and recovered more quickly. As Mr Kelly explained in his evidence:
“And actually, what happened is that young narrow-body aircraft, like the A321s, A320s, 737-800s, 73 MAXs, did not suffer that much by the end of 2020. So that by early 2021 even, we return aircraft market values back to their base value. The A321 NEO, in particular, was the most popular aircraft, it still remains one of the most popular aircraft. So that was the quickest aircraft to return what we call base value, stable market balance supply and demand. And that happened in our first half 2021 BlueBook. … So even though we forecasted 20% downturn, I think it ended up being more like 10% and then quickly returned in 2021 for those popular narrow bodies. Because people were flying domestic.”
[448]In short, the AVITAS data is and was well respected in the market, and Mr Brown’s criticisms of it did not suggest that it could not be relied upon as an accurate guide to leasing rates at the time or that it had undervalued the drop in the market for aircraft such as the A321 as a result of the Covid pandemic at as the redelivery date. Accordingly, there is no need to apply his additional discount to the AVITAS rates to reflect the downturn in the market caused by the pandemic.[449]There were a number of other differences between the two experts in relation to the lease rates for the Aircraft, which were apparent from their evidence but which VietJet did not deal with at all in their closing submissions. I summarise each of the points here: i) Mr Brown reduced the lease rates for the CEO Aircraft to reflect what he referred to as their “non-standard” high density configuration, and that it would be necessary to reconfigure them from an all-economy class to a two-class cabin. However, similar high-density configurations are popular with many airlines throughout the world, in particular low cost airlines. Mr Kelly and FWA pointed out that a number of the top European and US operators of A321 CEOs operate a high density configuration, including Turkish Airlines, Vueling, Wizz Air, JetBlue and others. There was nothing to suggest that the rates could not have been achieved for the CEO Aircraft with the configuration they had. ii) Mr Brown applied a volume discount to reflect the lease of all four aircraft in a single transaction. There was no basis for that. FWA would not necessarily have had to lease the Aircraft in a single transaction (and market conditions did not compel it to do so). Moreover, as Mr Kelly pointed out, although the Aircraft are all A321s, the market for CEOs and NEOs is not identical and, as Mr Brown accepted in cross-examination, some operators favour one type over the other. iii) Mr Brown made certain adjustments to the AVITAS rates because of certain respects in which the aircraft vary from the typical specifications used as the basis for the AVITAS rates. These included an increase in rates for the Maximum Take Off Weight of MSN 8937, and the absence of the Additional Centre Tank in MSN 8906, MSN 8592 and MSN 9577. The experts disagreed on the level of adjustment that would be required for such variations, and Mr Kelly noted that the differences were not materially different from the typical specifications such that there was no need to adjust the leasing rates as a result. Moreover, he noted that the CEO Aircraft had “sharklets” (wingtip devices to include fuel efficiency), which although a common delivery configuration from Airbus in this decade, is non-standard compared to the AVITAS CEO typical specification, such that if adjustments were being made an uplift ought to be made to reflect the sharklets. Taking all these points into account, I take the view that Mr Kelly was right to say that the sort of changes in value that these points might generate (including where with the CEO Aircraft points went both ways), being within a range of +/- 3%, was not sufficiently significant to suggest that the AVITAS rates based on “typical” specifications should not be used. iv) The AVITAS lease rates assumed a leasing term over a term of 3-10 years, as Mr Kelly assumed. Mr Brown applied a 5% discount, suggesting that the hypothetical lease would be for the length of the period between the redelivery date and the expiry date of the original VietJet leases, which was towards the longer end of that bracket and non-standard. However, the inquiry here is to ascertain an amount to reflect FWA’s loss of use of the Aircraft, by way of how much the Aircraft could have been leased for over the period of time in question (which does not run to the expiry of the VietJet leases), and that does not include having to lease out the Aircraft for exactly that period of time. There is no need to assume a precise fixed length of the lease for that purpose. The assumption used in the AVITAS rates, and by Mr Kelly, is perfectly reasonable in this respect.[450]Having considered each of the issues between Mr Kelly and Mr Brown in relation to the lease rates, for the reasons I have set out above, I prefer Mr Kelly’s approach, and it is his rates that should be used to calculate FWA’s loss. Loss Rent claims – conclusion[451]The result is that FWA is entitled to recover in respect of their claims for loss of rent in relation to the NEO Aircraft, at the rates identified by Mr Kelly being $324,000 per month for MSN 8906 and $305,200 per month for MSN 8937, for the period from 16 December 2022 to 22 May 2025. The parties agree that this amounts in total to the sum of $18,369,192.33. Alternative claims in Conversion / Mesne Profits[452]The central relevance of FWA’s claim in conversion was that it was said to provide the basis for a claim for (effectively) lost rental in respect of the CEO Aircraft for the period between the termination date and the redelivery date. That claim was not pursued in respect of the NEO Aircraft because FWA has already been awarded sums, under clause 20.4(c) of the sub-leases, by way of liquidated damages (the “Rental” at 150% normal rate) for that period.[453]FWA also brought the conversion claim for loss of maintenance and component utility in respect of all four Aircraft, in the alternative to its primary claims for those amounts under the indemnities already considered. I have already determined that FWA are entitled to claim that loss in respect of the NEO Aircraft under the contractual indemnity, such that the claim in conversion only matters in relation to the CEO Aircraft.[454]In respect of the period for which the claim was made, in oral closing submissions, Ms Cleary (who made submissions for FWA on this issue) stated that the conversion claim was made not from the termination date, but from the date(s) on which FWA took its assignment of rights, being 8-9 November 2021, because it was from that point that FWA had a right to possess the Aircraft.[455]FWA’s contention was that VietJet had refused to redeliver the Aircraft following termination of the leasing, and in doing so converted the Aircraft to its use. VietJet denied liability on a number of bases, including the lack of an unconditional demand for possession of the Aircraft, and the contention that FWA had no right to possession of the Aircraft at the relevant time.[456]As is well-established, the tort of conversion involves deliberate dealing with goods in a manner inconsistent with the claimant’s right, whereby the claimant is deprived of the use and possession of the goods. The claimant must, at the time of the alleged interference with the claimant’s right, have had either actual possession of the goods or an immediate right to possession of them which was superior to the possessory right of the defendant: see Court Enforcement Services Ltd v Marston Legal Services Ltd [2021] QB 129 at paragraphs 58 to 59.[457]An equitable owner has no title to sue in conversion unless it can show that it had actual possession or an immediate right to possession of the goods claimed: see MCC Proceeds Inc v Lehman Bros International (Europe) [1998] 4 All ER 675, 691D.[458]VietJet said that there were a number of reasons why such a claim could not work. Foremost among them was the contention that, in respect of the CEO Aircraft, the claim was simply another way of seeking to recover what was, under the JOLCO arrangements, “Excluded Property” and therefore not available to FWA. This is an extension of the point made in respect of the claim for lost rent for this period in respect of the CEO Aircraft under the clause 23.1 indemnity. i) As already determined, clause 20.4(c) provides a liquidated damages remedy for that period of time to deal with the fact that the Aircraft had not yet been redelivered. As I have already set out, the parties to the sub-lease cannot have intended that the Sub-Lessor could recover a different sum under other contractual provisions (for example, clause 23.1) for loss of rent than that provided under clause 20.4(c), which fixed the sum. Moreover, any sum due under clause 20.4(c) would be due to the Sub-Lessor, and the financing parties could not claim it, as clause 20.4(c) is Excluded Property. ii) I have held above that the parties to the sub-lease cannot have intended that a financing party could claim loss of rent (if it could otherwise prove it had suffered such a loss) for that period under clause 23.1, because to do so would lead to a double claim to lost rent for the same period (which cannot have been intended). Clause 20.4(c) is the exclusive remedy under the sub-lease for a loss of rent claim in the period it covers. iii) Similarly, the parties to the sub-lease cannot have intended that a financing party, or any other party ultimately deriving rights from those of the Sub-Lessor set out in the sub-lease, could bring an extra-contractual claim for lost rent for that same period of time, e.g. a claim in conversion. Such a claim would equally undermine the contractual scheme as would a claim for lost rent for that period under the clause 23.1 indemnity. By fixing liquidated damages for the retention of the Aircraft for that period of time in clause 20.4(c), the parties to the sub-lease were agreeing that was the exclusive remedy for lost rent claims for that period of time. iv) Whilst, as FWA pointed out, parties are not to be taken to be giving up valuable extra-contractual rights without clear express words to that effect (Modern Engineering (Bristol) Ltd v Gilbert-Ash (Northern) Ltd [1974] AC 689; and Lewison on the Interpretation of Contracts (8th ed.) at paragraph 12.24), the scheme of the sub-lease here (in the context of the wider JOLCO structure) was sufficiently clear. The purpose of having a liquidated damages clause dealing with the Sub-Lessee’s retention of the Aircraft for the period of time between termination and redelivery would be undermined if other parties were able to bring different and/or additional claims for loss of rent in the same period. Fixing the liquidated damaged mechanism for that period is a sufficiently clear contractual mechanism that other claims for damages for the same loss over that period are excluded. v) FWA also relied on clause 25.2 of the sub-lease, which expressly stated that the “rights, powers and remedies provided in this Agreement and the other Operative Documents are cumulative and are in addition to, and not exclusive of, any rights, powers and remedies provided by law.” Whilst on its face and taken in isolation, those words suggest there is no intention to affect non-contractual remedies, they must be read in context and against the background of the parties having agreed the liquidated damages provision in clause 20.4(c). There would be no sense to the parties having agreed that if they were also contemplating other claims for lost rent against the Sub-Lessee for the same period to be brought in different amounts and/or by other parties. Clause 20.4(c) is a clause specifically dealing with a liquidated damages remedy for such a loss in that period of time, which implicitly excludes other claims for such loss in that same period of time, and the parties cannot have intended that to be overridden by the general provision in clause 25.2. vi) To put it another way, the parties cannot have intended that, if the Sub-Lessor assigned its right to possession of the Aircraft, another party with that right to possession could have brought a claim for conversion for lost rent, based on the Sub-Lessee retaining the Aircraft during the period between termination and redelivery. The contract had specifically addressed the payment of a sum, in liquidated damages, for that period. The parties did not intend that liquidated damages would be payable and that a financing party (or its successor) or other party in a similar position would also be able to bring a claim in conversion for loss of use of the Aircraft (for “lost rental”) in this period. The liquidated damages clause acts as an implicit exclusion of such a claim. vii) The position thus agreed in the sub-lease may not be able to affect claims brought by any genuine third parties who derived rights (e.g. to possession of the Aircraft) other than from the Sub-Lessor’s rights in the sub-lease, but that is not the case here. FWA derived its rights from the Claims Assignment Agreements, under which it became entitled to certain rights under the sub-leases (among other agreements) but subject to the terms of the sub-lease. As an assignee of rights under the sub-lease, it cannot subvert the position agreed by the parties to the sub-lease by bringing a claim in conversion that is implicitly excluded by the terms of the sub-lease.[459]The above focusses on the loss of rent claim. However, the same analysis does not follow for the claim for loss of component utility. The fact that the Sub-Lessor has the right to have the Aircraft redelivered in the Return Condition does not implicitly exclude all other claims for loss in relation to the condition of Aircraft (if the claimant has a claim and can prove it has suffered loss).[460]As a result, FWA does not succeed in its claim in conversion for lost rent. I continue to consider the claim in conversion for loss of component utility.[461]In order for FWA to maintain a claim in conversion, it must demonstrate that it had either actual possession of the Aircraft or an immediate right to possession. FWA sought to establish an immediate right to possession in two ways: first, under the terms of the contracts, including the sub-leases and the Claims Assignment Agreements, and second under the terms of Regulations (which, as I have said earlier, are the instrument implementing the Cape Town Convention in the UK).[462]In respect of the terms of the contracts, FWA contended: i) Clause 19.2 of the sub-leases provided that, on the giving of a Notice of Termination: a) By clause 19.2(a), the Sub-Lessor had the right to “retake possession” of the Aircraft, and/or b) By clause 19.2(b), the Sub-Lessee was obliged to return and redeliver the Aircraft to the Sub-Lessor in accordance with clause 20. ii) That VietJet’s right to possession ended upon service of the Termination Notices, which stated that VietJet’s “rights to possess, access and operate the Aircraft hereby immediately cease and terminate” and demanded that VietJet “ground the Aircraft and redeliver it … in accordance with the [head lease] and the [sub-lease].” iii) The fact that clause 20 was Excluded Property may have meant that the financing parties (as assignees of the Sub-Lessor) did not have the right to insist upon redelivery at a particular location and in a particular condition, but that did not disturb their right to take possession under clause 19.2. iv) FWA had that right to take possession from the date of the Claims Assignment Agreements.[463]However, as VietJet pointed out, the Claims Assignment Agreements did not assign all of the rights that FWC had obtained from the Security Trustee. The rights were carved up, some being kept by FWC and some being assigned by FWC to FWA. The assignment to FWA excluded what was referred to as the “Aircraft Excluded Property”, which was defined in the Claims Assignment Agreements as follows: “Aircraft Excluded Property” means:(a) the Aircraft, including the Airframe, the Engines and Parts and any Technical Records in respect of the foregoing (together, the “Aircraft Assets”); and(b) any bill of sale relating to the Aircraft Assets, including the amounts specified in clauses 19.3(a), (b), (c) and (d) (Payment on Default Termination) of the Lease and/or the Sub-Lease but only in the event that those clause 19.3 payments are received within thirty (30) days of the Termination Date as part of the exercise, in full compliance with all relevant terms, by the Lessee or the Sub-Lessee of its right to take title to the Aircraft under the final paragraph of clause 19.3 (Payment on Default Termination) of the Lease or the Sub-Lease (as applicable) upon the payment of those amounts together with the Termination Price (as defined in the Lease or Sub-Lease, as applicable), and provided that the Aircraft Excluded Property (x) is limited to those properties, rights, title, interests and privileges which comprise or derive from any redelivery, return, retaking of possession or sale of the Aircraft contemplated by the provisions of Clause 19 (Remedies) of the Lease and/or Sub-Lease or any other action in connection with the Aircraft, and (y) (for the avoidance of doubt) shall not include any rights or assets referred to in the first paragraph of clause 19.3 (Payment on Default Termination) of the Lease or the Sub-Lease in circumstances other than the exercise, in full compliance with all relevant terms, of the right to take title to the Aircraft under the final paragraph of clause 19.3 (Payment on Default Termination) of the Lease or the Sub-Lease as referred to in the paragraph commencing “including” above.” [italics as in the original][464]The words following “provided that” made it clear that the right to redelivery, return or possession under clause 19 of the sub-lease fall within “Aircraft Excluded Property” and was therefore intended to be retained by FWC. In particular, its use of the word “comprise” as well as “derive from” demonstrates that it was the rights themselves that were included in the “Aircraft Excluded Property”, not only the fruit of the exercise of those rights. It makes sense that, given that the parties were not intending to assign rights to the Aircraft itself to FWA, that they were also not intending to assign a right to redelivery or take possession of the Aircraft.[465]The result is that the rights under clause 19 were not assigned to FWA under the Claims Assignment Agreements, and FWA cannot rely on them to found an immediate right to possess the Aircraft at that point in time.[466]FWA drew attention to the fact that, on 13 June 2022, some months after FWC had sold the CEO Aircraft to the “Trustee Owners”, a “Side Letter” in relation to each of the Claims Assignment Agreements was entered into between FWC, FWA and the respective Trustee Owners (the “Side Letters”). The sale to the Trustee Owners had been a sale of the “Aircraft Assets” as defined in the sale agreement, which constituted (under clause 2.1.1):
“(a) the Aircraft, including the related Airframe, Engines and Parts and any Technical Records in respect of the foregoing, in each case as defined in the New York Mortgage; and (b) any bill of sale relating to the Aircraft Assets under subclause (a) above.”
The definition had gone on at clause 2.1.2 expressly to exclude all of the rights, title and interest of the “Security Agent in any capacity in, to and under the Assigned Property (as defined in the Lessor Security Assignment) assigned to the Security Agent under the Lessor Security Assignment” and of the Security Agent in or under any other Security Documents (other than the Mortgage). It also expressly stated (in similar language to that in the Claims Assignment Agreement) that:
“2.1.4. Notwithstanding anything to the contrary, the Aircraft Assets are in any event limited to those properties, rights, title, interests and privileges which comprise or derive from any redelivery, return, retaking of possession or sale of the Aircraft contemplated by the provisions of Clause 19 (Remedies) of the Lease and/or Sub- Lease or any other action in connection with the Aircraft.”
[467]There may, therefore, have been some tension in the sale agreement as to whether the rights of redelivery and repossession were to be kept by FWC or transferred to the Trustee Owners, though the better view (in light of the opening words of clause 2.1.4) appears to be that they were transferred to the Trustee Owners. In any event, by the Side Letters, FWA, FWC and the Trustee Owners sought to clarify the position in respect of what the Side Letters defined as the “Redelivery and Return Rights”:
“Redelivery and Return Rights shall mean any rights of the Lessor and/or the Lessee (as applicable) under the Lease and/or the Sub-Lease (as applicable) to the redelivery, return, retaking of possession or sale of the Aircraft contemplated by the provisions of Clause 19 (Remedies) of the Lease and/or Sub-Lease (as the same were assigned to the Assignor pursuant to the Lessor Security Assignment).”
[468]The Side Letters stated that the Redelivery and Return Rights had not been intended to be included in the “Aircraft Excluded Property Rights” in the Claims Assignment Agreements, but rather it had been intended they be transferred to FWA under those assignment agreements. The Side Letters went on to say that, to the extent that the Redelivery and Return Rights were not previously assigned to FWA, FWC or the Trustee Owners (depending on whether those rights had been transferred by FWC to the Trustee Owners) now assigned them to FWA. The Side Letters did not change retrospectively what had been assigned under the Claims Assignment Agreements (or the sales to the Trustee Owners), such that FWA had not obtained the Redelivery and Return Rights in November 2022, but they did have the effect of transferring those rights to FWA in June 2022.[469]The position as at June 2022 was, therefore, that FWA had obtained the right to redelivery or to repossess the Aircraft. It was the Trustee Owners, however, that owned the Aircraft. I will consider shortly to what extent this gives FWA the right to bring a claim in conversion.[470]The second way in which FWA contended it had a right to possess the Aircraft was under the terms of the Regulations. This was a point considered, albeit obiter, by Picken J in Judgment 2 at paragraphs 165 to 173. Picken J held that the Regulations gave FWA an entitlement to possess the Aircraft from the date of the Claims Assignment Agreements. Given that his consideration of this point was, for the issues that arose before him at the second trial, not necessary for his ultimate decisions, I am not bound to follow Picken J’s conclusion on this point. However, having considered the reasons he gave, and the parties’ arguments before me on the same point, it appears to me that he was correct, for the reasons that he gave (which I gratefully adopt). In summary: i) Under the Regulations, “associated rights” are defined, in paragraph 5, as meaning “all rights to payment or other performance by a debtor under an agreement which are secured by or associated with the aircraft object”. A “debtor” is defined, again in paragraph 5, as meaning “a chargor under a security agreement, a conditional buyer under a title reservation agreement or a lessee under a leasing agreement”. “Associated rights” include both secured rights and rights associated with the aircraft object. The Official Commentary explains that rights are secured by the object “when the agreement providing for such rights is a security agreement by which the charger grants security over the object to the chargee” and includes all rights against the debtor which arise under the agreement which are secured on the object (whether they be rights to money or non-monetary performance). As to rights associated with the aircraft object, the Official Commentary explains at paragraph 4.227: “Rights are associated with the object, as opposed to being secured on it, where they are rights to payment or other performance (for example, maintenance, repair and insurance) by a conditional buyer under a title reservation agreement or a lessee under a leasing agreement. Rights of the creditor to performance by the debtor which is unrelated to the transfer of ownership under a conditional sale agreement or the debtor’s right to retain possession under a leasing agreement are not associated rights. This is because under the terms of the agreement non-performance does not affect the transfer of ownership or confer on the creditor the right to repossess the object.” ii) The Claims Assignment Agreements, in transferring the rights to payment under the sub-leases, were assignments of “associated rights” within the definition. This is whether or not those transfers included the rights to redelivery and possession as a matter of contract, because the right to payment under the sub-leases is an associated right (it pertains to the right to retain possession under the sub-lease). iii) Regulation 27 (which I will not set out in full) states that an assignment of associated rights (made in conformity with regulation 28, which there was no argument about) also transfers to the assignor the related international interest and all the “interests and priorities of the assignor” under the Regulations and the Cape Town Convention. Picken J explained the nature of an international interest under the Convention at paragraph 25 of Judgment 1. iv) There were subsisting defaults (being Events of Default under the sub-leases) at the time of the Claims Assignment Agreements. v) As a result, FWA were entitled, as long as it held the international interest formerly held by the Sub-Lessor, to exercise the remedies arising pursuant to the Regulations that would have been available to the Sub-Lessor, including an entitlement to take possession of the Aircraft when there was a default under the sub-lease agreements: see Regulation 21(2)(a). vi) It is not the case that a creditor is not entitled to possession because it (or its ultimate assignee) lacks title to the aircraft object. I do not repeat, but rely on and adopt, the reasons given by Picken J for this at paragraphs 171 to 173 of Judgment 2.[471]As a result, FWA had a right to possession of the Aircraft under the Regulations from 8 November 2021 and as a matter of contract from 13 June 2022. However, as I have noted, FWA only had those rights to take possession, and had no right to ownership or other proprietary right. VietJet contended that, whilst the right to possess could be derived from a contract, the right to possession had to be a proprietary right; a mere contractual right was insufficient. As to this: i) Clerk & Lindsell on Torts (24th ed.) takes the view (at paragraph 16-62), relying among other cases, on Jarvis v Williams [1955] 1 WLR 71, that “it seems that the immediate right to possession on which the owners relies must be a proprietary right; a mere contractual right to be given possession will not do.” ii) The Law of Personal Property, Bridge et al. (3rd ed) takes a similar view (at paragraph 33-039) in stating that certain dicta support the view that the transfer of a contractual right to take possession of goods from a third party will give the transferee a right to immediate possession of the goods, and thus also standing to sue in conversion, where the intention of the transferor is that the general property in the goods will pass to the transferee once possession is obtained. However, it goes on to state that where those dicta go further and suggest that the transfer of a contractual right to immediate possession will give the transferee standing to sue even in the absence of an intention to transfer the general property, they are wrong and cannot be reconciled with Jarvis v Williams. iii) The key authority relied upon by FWA in this respect was the decision of the Court of Appeal in Government of the Islamic Republic of Iran v The Barakat Galleries Ltd [2009] QB 22. The Court did not consider that Jarvis v Williams could safely be treated as binding precedent for the proposition that a contractual right to immediate possession could never found a claim in conversion (paragraph 26) and stated, at paragraph 30: “Where the owner of goods with an immediate right to possession of them by contract transfers the latter right to another, so that he no longer has an immediate right to possession, but retains ownership, it would seem right in principle that the transferee should be entitled to sue in conversion. A fortiori if the contract provides that when the transferee enters into possession, ownership will be transferred to him.” iv) However, as the Court then went on to note (at paragraph 31), contractual transfer of rights was “far removed from the facts of” the case before it. It went on to consider whether Iran had an interest in the property there in issue (certain antiquities) and what the nature of its interest was. It concluded (at paragraph 74) that Iran was entitled to immediate possession, and then went on to consider whether Iran enjoyed rights of ownership. It concluded that, under Iranian law, Iran was the owner of the antiquities or, in any event, it had an immediate right to possession of the antiquities that would vest ownership on taking possession (paragraph 84). The discussion in the case suggests that, when it came to assessing Iran’s rights accruing as a matter of Iranian law, it remained important that Iran had, or would acquire on possession, ownership of the antiquities.[472]The quotation set out above from paragraph 30 of the Court of Appeal’s decision dealing with transfer by contract of a right to possession is not universally accepted, and is one that the two text books I have noted find controversial. Neither party developed its submissions in any detail as to whether the rights to possession held here by FWA were sufficient to found a claim in conversion in the light to the above matters, and it potentially raises difficult issues. However, on the facts of this case, and given the nature of the rights to possess that FWA had, it does not seem to me to make a difference whether, in principle, such a claim (namely, a claim for conversion where the claimant has no proprietary right) could be maintained. The claims fail in any event – the claim to lost rent for the reason I have already explained, and both claims because FWA did not show it had suffered any loss, as I explain below.[473]Here, FWA is not seeking as damages in conversion the market value of the goods. That is sometimes referred to as the general rule for damages in conversion (see Clerk & Lindsell paras 16-95 ff), and is generally available even where the claimant did not have ownership of the goods (though having an immediate right to possession). However, given that ultimately the Aircraft were redelivered, that is not a claim made here. Rather, the claims made are for consequential loss by way of loss of rent and for loss of component utility over the period in question, which require proof of loss (see e.g. Clerk & Lindsell paras 16-110 to 16-112). Both of those claims depend upon FWA being entitled to possession not just at the time the claim arises, but also throughout the period in question. The fundamental object of an award of damages for conversion is to award just compensation for loss suffered (see Kuwait Airways Corpn v Iraqi Airways Co (Nos. 4 and 5) [2002] 2 AC 883, 1094 Lord Nicholls at para 87; Clerk & Lindsell para 16-95). It is up to FWA to prove its loss in that respect as much as for any other claim for damages. However, the rights upon which FWA relies in order to ground its claim in conversion do not go beyond a right to take possession. They do not amount to a right to possess the Aircraft for any period of time or to extract value from the Aircraft. The rights conveyed by way of the Side Letters enabled FWA to exercise the rights to repossess under the sub-leases, but otherwise FWA had no rights to the Aircraft – if it had taken redelivery in June 2022, it had not been granted any right by the Trustee Owners to keep possession, and it had no proprietary interest to suggest it might be able to do so. Its equitable interest being insufficient, as confirmed in MCC Proceeds v Lehman, cited above. All it had was a contractual right to obtain possession from VietJet. The same is true in relation to its right under the Regulations, which was to take possession, but no other right was relied upon to suggest FWA would be able to retain possession. If it had obtained possession in, for example, December 2021, FWA would have had no continuing right to keep possession, particularly where it had agreed (in the Claims Assignment Agreement) that FWC had kept ownership of the Aircraft and (as a matter of contract) the right to obtain repossession and redelivery.[474]There was no case run or evidence deployed to explain how FWA was said to have suffered loss by not being able to take possession, or how loss of the type alleged was said to have been suffered by FWA having been kept out of possession. FWA did not seek to prove that, had it repossessed the CEO Aircraft in (for example) December 2021, it (rather than FWC, the owner at the time) would have leased them out to its own financial benefit or otherwise realised value from them. Similarly, FWA did not seek to prove that it (rather than, for example, the owner of the Aircraft) suffered by way of loss of component utility in the CEO Aircraft over this period.[475]FWA also put its claim for loss of rent (which I have held is in any event not open to it) as one for mesne profits, also sometimes referred to as user damages, relying on Blue Sky One Ltd v Mahan Air [2010] EWHC 631 (Comm) (at paras 58-59 and 133-135). It did not develop its argument in relation to this at all at trial, and in oral closing FWA confirmed that it did not add anything to its case on damages for conversion. That seems to me to be right in the circumstances of this case. In Blue Sky, Beatson J summarised it as applicable in a situation in which a wrongdoer has benefited from “use of goods owned by another”, and the cases referred to (for example Strand Electric and Engineering Co Ltd v Brisford Entertainments Ltd [1952] QB 246) discussed the issue in the context of the owner having been deprived of his use of the goods. FWA was not the owner here. In short, FWA were not deprived of the use of the Aircraft for the period of time in question, because it has not proved that it would have had such use.[476]The result is that FWA has not been able to prove how its right to obtain possession of the CEO Aircraft led to the loss that it claims.[477]The last point to note in relation to the conversion claims is that VietJet also sought to defend them by contending that FWA had not served an unconditional demand that VietJet surrender possession of the Aircraft. VietJet contended that the Termination Notices required redelivery in accordance with the terms of the sub-leases, which it said when properly construed suggested that VietJet should retain possession during a delivery process to be worked out between the parties. If this had been a crucial point (which it is not, given I have already rejected the claims in conversion), it does not seem to me to be one that would have availed VietJet. In terms of alleged acts of conversion, FWA relied not only on the continued retention by VietJet (where the notices to return may have been important), but also on VietJet’s continued unauthorised use of the Aircraft. By continuing to fly the Aircraft in its service, post termination, VietJet was clearly converting the Aircraft to its use. Moreover and in any event, I do not accept that FWA’s position in its notices and generally was insufficient – it was clear that VietJet should cease to operate the Aircraft and that its entitlement to possess the Aircraft was at an end.[478]In light of the above, the claims in conversion for the CEO Aircraft fail. Costs of Enforcement[479]Under this heading, FWA claimed various costs it said it had incurred in relation to preserving and enforcing its rights under the sub-leases, including the costs of this litigation. The appendix to its written opening submissions summarising the costs claimed included costs amounting to some $47.76 million. This was split by FWA in its claim as to a quarter for each of the four Aircraft. However, a very substantial portion of that total amount comprised FWA’s costs of this litigation, including the costs of the first and second trials which it has already been awarded (on the indemnity basis, as a result of the contractual provisions providing indemnity); other items of cost would also fall within the costs of this litigation as costs of this third trial, should they be recoverable as such by FWA and if a costs order was made in its favour. Moreover, as I explain below, in relation to certain other items originally claimed FWA withdrew its claim during the course of its closing submissions. Accordingly, although the headline figure of $47.76 million is a large one, the value of the items in dispute was somewhat smaller.[480]As clarified in FWA’s closing submissions, the claims were made under clauses 10.2 and 23.1 of the sub-leases.[481]The claims fall into three broad categories: i) The costs of these proceedings. ii) Other legal costs (in this jurisdiction and elsewhere). iii) Non-legal costs.[482]In its closing submissions, FWA made it clear that it no longer pursued an indemnity under this head in respect of the third of these categories, non-legal costs. I therefore say no more about that.[483]In relation to the first of these categories, the costs of these proceedings, there was no real dispute about what should be done. The incidence of those costs will fall to be determined after judgment, taking into account (among other things) points on which each party has succeeded at trial. Relevant to that will be, for example, the fact that I have determined that almost all of the claims made at this trial in respect of the CEOs are not recoverable by FWA, such that costs incurred in pursuit of those claims will not have been incurred in preservation or enforcement of FWA’s rights under the sub-leases. The existence of the indemnity/ies will no doubt be relevant to the basis of assessment of any costs awarded in FWA’s favour, as they were after the first two trials (subject to argument about whether the relevant indemnity/ies is engaged in the circumstances). But the incidence of costs of this third trial will await determination after the hand down of this judgment and the parties’ argument about those costs. As I have noted, this makes up the bulk of the total amount of this claim. Although I was not given a precise breakdown of figures, the total costs of the items for Quinn Emanuel (most of whose costs appeared to relate to these proceedings), counsel for these proceedings, and Mr Bull’s expert fees, amounted in Appendix 1 to FWA’s opening to over $35.5 million (in addition to at least part of the $6.5 million paid to Norton Rose Fulbright, who it appears have also been retained by FWA in relation to these proceedings).[484]It is in relation to the second category, namely other legal costs said to have been incurred by FWA, that the arguments made by the parties come to bear. These included costs described in the Appendix to FWA’s written opening submissions such as “Legal advice for repossession (Australia)”, “Legal advice (lease terminations) (Ireland)”, and a number of other descriptions. As I explain further below, one difficulty with the claim for these items was the absence of detail as to what they were and why they had been incurred.[485]FWA confirmed at trial that, in respect of the costs of foreign proceedings, it did not seek to recover costs that had been the subject of any costs orders in foreign proceedings or where it was open to FWA to seek its costs in the foreign proceedings but it did not do so (which VietJet had contended in opening were irrecoverable but, as a result of FWA’s agreement on this point, I do not need to decide).[486]Certain points of principle that arose in relation to these claims have already been dealt with above: i) VietJet contended that FWA could not recover costs incurred by other FitzWalter entities. I have already considered and dismissed that point above. ii) VietJet contended that clause 10.2 was exhaustive of the Sub-Lessor’s rights to an indemnity for its fees, expenses and out of pocket costs, such that no claim for such items could be pursued under clause 23.1. That is similar to some of the other arguments made by VietJet in relation to the terms of the sub-leases that I have already dismissed. The existence and applicability of one indemnity does not (or not necessarily) prevent another also from applying, if on its terms it does so. Clause 10.2 is not equivalent to a liquidated damages clause nor does it otherwise implicitly exclude other provisions of the sub-lease or other remedies.[487]However, as I have also already considered, once the CEO Aircraft had been sold to the “Trustee Owners”, whilst it had rights under the sub-leases as an affiliate or assignee of a financing party, it did not suffer loss as a financing party recoverable under the indemnities. Costs that FWA incurred in this litigation up to and including trial 2 may still fall within the indemnity/ies because of the nature of the claims being pursued by FWA in those trials (including for the relevant Termination Sums, to which FWA had an entitlement without having to prove loss). However, costs and expenses outside this litigation that were incurred after the date at which the CEOs were sold to the “Trustee Owners”, e.g. in pursuit of the export of the CEO Aircraft from Vietnam, were not incurred in preservation or enforcement of rights under the sub-leases. The result is that it is likely that a substantial amount of the legal costs (outside the costs of this litigation) attributed to the CEO Aircraft would be irrecoverable.[488]There was, however, a more intractable problem for FWA in its seeking to claim and recover these costs at this trial, which was that it had not attempted in any real way to prove its claim for them in terms of evidence as to the costs having been incurred, that the claimed costs fell within one or more of the indemnities, or that they had been reasonably incurred. VietJet contended at trial that FWA had, as a result, not discharged its burden of proving that the costs claimed fell within the scope of the indemnity/ies, such that their claims to these amounts failed.[489]The position in relation to evidence was as follows: i) FWA called no witness at the third trial to deal with these costs. When it became clear in opening that there was an issue between the parties as to whether FWA were liable for costs incurred by other FitzWalter entities, FWA said it would rely on paragraphs 103 and 104 of Mr Weinstock’s first witness statement (previously put into evidence at the first trial) on which FWA said during this trial it tendered Mr Weinstock for cross-examination. VietJet chose not to challenge those paragraphs. I have referred to and relied on that in the context of the issue for which it was deployed. However, it was of little assistance in relation to the issues relating to the detail of the enforcement costs claimed. Mr Weinstock said, in those paragraphs of his statement, in very general terms that: a) VietJet’s alleged non-compliance had “necessarily involved engaging legal advisors in various jurisdictions including the UK, Vietnam, Singapore, Guernsey, Ireland, Australia and the United States.” b) He attached at Appendix 1 to his statement a “full list of third party professionals that have been engaged”, which he said had been prepared by a colleague and briefly summarised the role of each entity, while also explaining that some entities had assisted FitzWalter Capital with unrelated projects during the relevant period. He said the amount claimed would be reduced to the extent any of the invoices relied on included work on unrelated projects. c) The Appendix was not itself included in the parts of the statement on which FWA tendered Mr Weinstock for cross-examination at the third trial or which VietJet confirmed they did not challenge. But in any event it was extremely general, simply listing various entitles with very short descriptions of the “services provided”, for example “Allens: Legal advice for repossession.” There were no figures in his Appendix. Some items in the Appendix to FWA’s written opening were not included in Mr Weinstock’s appendix (e.g. “Romulo: Philippines’ counsel”; “Vietnam International Law Firm: Deregistration”), and the descriptions of the services in the latter were in general even less specific than the former (which were themselves not very detailed). ii) FWA had disclosed invoices which it said supported its claim for enforcement costs, which I was told had been put in to the trial bundles, but I was not given a comprehensive digest of where they all were or which invoices supported which claims. It was apparent, however, that the invoices dealing with the legal costs had all or almost all been redacted for privilege. They were, as a result, not very informative. In his closing submissions, Mr Shah confirmed that he was not relying on any witness who had explained or given evidence about what was in those invoices or what services they covered. iii) During the course of the trial, FWA’s solicitors, Quinn Emanuel, sent a letter dated 11 March 2026 setting out the various categories of costs which were claimed, listed by law firm or other service provider, and seeking to give an explanation of what the costs were for. FWA then sought to rely on that in its closing submissions as a point of reference but, of course, those were not explanations that had been given in evidence or that VietJet had had an opportunity to test through the trial process. iv) FWA accepted that, as a result, I was not in a position to assess or determine whether the costs were reasonable, or the quantum of the costs claimed. It also accepted that there was no process at the trial to interrogate the costs which it said had been incurred by reference, for example, to the narratives on invoices as those largely had been redacted.[490]The approach which FWA urged me to take as explained in its oral closing submissions was that I should decide, as a matter of principle, which categories of costs claimed by FWA fall within or outside the contractual indemnities, by reference to descriptions of those categories given by Quinn Emanuel in their letter of 11 March 2023, but not seeking to assess whether any of the costs claimed actually fell within those categories or not. And then I should leave questions of whether any costs fell within such categories, the reasonableness of such costs and the quantification of them to be dealt with by a costs judge at a later date. I should note that Mr Shah expressly confirmed in his oral closing submissions that, for legal costs to be recoverable under one or more of the indemnities, FWA would have to prove they were reasonable.[491]This was a somewhat unsatisfactory proposal. The descriptions of the categories of costs claimed were given in a solicitors’ letter part way through trial and, as I have already noted, were not sought to be deployed in evidence at any stage. Mr Shah confirmed in his oral closing submission that he was not suggesting that I should or could rule on whether the descriptions so given were an accurate reflection of the costs that had been incurred. I simply was not provided with the material to do that. Rather, he was suggesting I should assume they were correct, and then rule on whether they would fall within or outside the contractual indemnities, leaving everything else to be determined by a costs judge. He recognised that none of the submissions he had adduced in writing (or orally) had explained how each of the categories in the letter were said to fall within one or more of the indemnities, but offered to put in a schedule following the close of the trial setting that out. I permitted FWA to file such a schedule, and for VietJet to put in a response to it (which it did on 7 April 2026). The “Appendix 1 to FWA’s Closing Submissions” thus submitted simply identified the categories of costs claimed, by reference to the 11 March 2026 letter (albeit rearranged in terms of presentation and order) and, by reference to those categories, identified under which contractual provisions they were said to fall and (in brief terms) why. It was by reference to those categories that I was invited by FWA to determine, as a matter of principle, whether they were recoverable.[492]However, this does not appear to me to be a sensible or appropriate exercise to embark upon, for the following reasons: i) It was for FWA to prove, at this trial, what it was claiming under this part of the claim and why. It did not at any stage prior to the trial seek a case management direction that all or part of the inquiry in relation to this should be postponed to a separate date. Even during the course of the trial, it was far from clear what FWA was proposing be determined, and how, in relation to this claim – it was only during the course of its oral closing submission that it became apparent, and even then FWA needed to put in further submissions by way of its Appendix 1 after the end of the trial. However, none of that dealt with the key problem which was that FWA had not advanced any, or at least any sufficient, evidence to deal with this part of its claim. ii) As appears from FWA’s Appendix 1 to its closing submissions, the costs were claimed under clause 10.2 or clause 23.1 of the sub-leases. FWA ought to have come to trial with at least prima facie evidence to demonstrate that the costs claimed fell within one or both of those clauses. If the invoices (with suitable redactions, if and insofar as necessary) did not speak for themselves, a witness could have given evidence about what the costs were and the circumstances in which they had been incurred. It is difficult to see how that would have required FWA to divulge privileged information. However, the invoices (as redacted) do not (as far as I was shown) enable the court to determine what was done, or why. Mr Weinstock’s statement, insofar as it was put into evidence at this trial, did not improve the position, and in any event was made in October 2023, before at least some of the work for which claims are now made. FWA, in closing, effectively acknowledged the difficulties by confirming that I was not expected to make any determination of what costs had been incurred or whether the categories described by Quinn Emanuel in their letter were accurate. iii) The descriptions given in the Quinn Emanuel 11 March 2026 letter were, as I have noted, not given in evidence. No explanation was provided why such explanations had not been provided, in a witness statement tendered in evidence for trial, at an appropriate stage. It was not suggested they could not have been. In any event, the descriptions given in that letter remain at so high a level as to amount to little more than bare assertions that the cost of the work done by the payee would fall within the scope of the indemnity/ies. It is difficult to see the utility of an exercise whereby I assess those high-level descriptions against the words of the indemnities to determine whether, if those descriptions were accurate (which I am not asked to determine), costs within those descriptions would be recoverable. For example, there are several items referring to legal advice in connection with “efforts to secure repossession of the Aircraft”. The assessment of whether the actual costs (if and when they are identified) fall within the indemnities is likely to be more nuanced than that. iv) Other descriptions were simply unexplained, such as a category of costs identified as “Advice relating to potential claims in connection with the Aircraft under the Trans-Pacific Partnership”. No evidence (or, as far as I am aware, mention) was made at trial of the Trans-Pacific Partnership, or whether or at what stage FWA might have considered any such claims (or what those claims might be). Another category of cost was simply described as “Service of notices in Ireland in July 2024”, with no explanation of what those notices were or why they were served. I do not see how I could possibly take any sort of informed view as to whether such costs fell within or outside the scope of the indemnities. v) In other cases, the descriptions given in the Quinn Emanuel letter were not the same as those which had been given in the Appendix to Mr Weinstock’s statement or in the appendix to FWA’s written opening. For example, an amount was claimed in respect of Clifford Chance Pte Ltd, said by Mr Weinstock and FWA’s opening to have been in respect of “Transfer of loans” (so, one might assume, advice on the transfer of the loans from the original lenders at the outset). However, Quinn Emanuel’s letter described this as “legal advice in connection with the enforcement and sales process from October 2021-January 2022 and efforts to secure repossession of the Aircraft”, not referring to the loans at all but to subsequent actions. This demonstrates the unsafe foundations on which FWA’s proposal for dealing with this were based. vi) It was proposed that I should not be determining whether any of the costs were reasonable, but should leave that with all other subsequent issues to be determined by a costs judge. The parties agreed that, in principle, such matters might be left to be determined by a costs judge, An example of a costs judge being left with a determination of costs incurred in foreign proceedings can be found, for example, in National Westminster Bank plc v Rabobank Nederland [2007] EWHC 3163 (Comm); [2008] 6 Costs LR 839. but as VietJet pointed out, the exercise contemplated by FWA would go beyond what is normally so left and contended it should not be done here. I agree. The exercise would include determining not only whether the costs incurred in foreign proceedings were reasonable, but also whether the costs of foreign lawyers giving advice (outside any litigation) were reasonable, and whether such costs fell within the terms of the relevant indemnities (with only the high level guidance that FWA sought that I give to assist on that point). Questions of reasonableness would include not only, for example, what a reasonable hourly rate might be for the foreign lawyer in question, but also whether the steps taken which were being charged for were reasonable ones to have taken in the circumstances. Such determinations would require a familiarity with the processes for repossession and export of the Aircraft undertaken by FWA (as well as the foreign legal processes in question), and the reasonableness of steps taken may well require testing through a trial process (which might have been undertaken as part of the third trial, but which is less obviously suitable as part of a costs assessment process). Whilst there may be circumstances in which such points might suitably be sent to a costs judge, I do not think that is the case here. If FWA had contemplated that as the solution, there should have been a much greater engagement at an earlier stage with it as a proposal, and a properly thought-through framework of the issues to be left with the costs judge identified; a greater degree of attention should have been paid to what I was going to be asked to determine, such that I could have resolved points of real utility in relation to the recovery of certain heads of costs. vii) It was apparent from VietJet’s submissions that there were likely other issues of principle as to recovery of certain sums, for example costs of legal advice that had been obtained by FWA that related to a number of aircraft, not confined to the Aircraft (the example was given of advice given by Norton Rose Fulbright LLP during October 2021 that Quinn Emanuel said in correspondence “addressed the overall enforcement strategy and rights applicable to multiple aircraft under the VietJet JOLCOs” which was said to have had application to at least one other aircraft (namely, MSN 8670)). It appeared from that correspondence that FWA contended the entire cost formed part of its “enforcement costs claim” in this litigation, though VietJet contended that could not be so. But FWA did not seek to deal with this point at any stage of the trial or its closing, and did not suggest how it ought to be dealt with. It is clear that these issues ought to have been identified and presented for determination, on the basis of evidence given at trial. viii) As I have noted above, FWA accepted that, in respect of the costs of foreign proceedings, it did not seek to recover costs that had been the subject of any costs orders in foreign proceedings or where it was open to FWA to seek its costs in the foreign proceedings but it did not do so. However, I was given no assistance as to what costs orders had been made in foreign proceedings or whether the foreign jurisdiction(s) in question permitted recovery of costs. There is no reason why FWA could not have identified their case on such points and, if there had been a dispute (for example as to ability to recover costs in the foreign proceedings), sought to have it resolved at trial. ix) In summary, it is not appropriate or satisfactory, in the circumstances of this case, to engage in a process of making what would essentially be hypothetical rulings about the recoverability of high-level categories of costs concerning which no evidence has been adduced. This trial was the time for FWA to adduce its evidence in support of its claim for these amounts, or to have proposed a different course at a sufficiently early stage such that it could properly be considered and, if appropriate, adopted. It did not do that. The result is that FWA has not discharged its burden of proving that the costs it claims fall within the scope of the indemnities on which it relies or that they were reasonably incurred.[493]Accordingly, FWA’s claim for its other legal costs fails. Its claim for the costs of these proceedings will be dealt with as part of the argument on costs after the hand down of this judgment. VietJet’s Counterclaim[494]VietJet’s counterclaim relates to two of its engine stands (with serial numbers 392 and 477), on which the two engines for MSN 8937 were held (engine 771331 in Vietnam, and engine 771335 in Singapore at Eagle Services) on redelivery. VietJet redelivered the engines to FWA in these engine stands on 15 December 2022. It demanded the return of the engine stands some 18 months later, by letter dated 2 July 2024. FWA responded by letter dated 24 July 2024 that it would return the engine stands once it had made alternative storage arrangements for the engines, which were still held on those stands at the time.[495]Engine stand with serial number 392 was then returned to VietJet on 18 September 2024. Engine stand with serial number 477 took a little longer to return – it held the engine at Eagle Services in Singapore, and FWA stated that it was not possible to return the engine stand whilst the engine was undergoing maintenance. It was ultimately returned to VietJet on 10 January 2025.[496]VietJet claims the sum of $487,188, said to be the cost of renting equivalent engine stands for the period from the redelivery date in December 2022 to the respective return dates for each of the engine stands. It puts its claim in conversion and in unjust enrichment.[497]The short answer to this claim, whether it is put in conversion or in unjust enrichment, is that it fails for circuity of action. FWA required engine stands for the two engines for MSN 8937, because that aircraft was redelivered by VietJet without those engines installed. One was in the Eagle Services in Singapore, where it remained for a considerable period of time (as I have set out above), and the two engines could not be reinstalled on to the Aircraft until the work was completed and engine 771335 had been returned from Singapore to the Aircraft in Vietnam. FWA required engine stands for the entirety of the period for which they were used, and the cost of those engine stands was recoverable from VietJet. Indeed, once the VietJet stands had been returned to VietJet, FWA rented a replacement stand, claiming that cost under claim 9(a), to the cost of which, in principle, VietJet and Mr Brown did not object (though there was a separate dispute as to the reasonableness of the cost of shipping the replacement stand from Los Angeles, which I have dealt with at paragraph ‎370 above). Indeed, Mr Brown in the joint memorandum suggested that it would have been reasonable for FWA to continue to hire the engine stands from VietJet for the period for which the cost of hiring engine stands was made.[498]As a result, the cost of hiring engine stands for the two engines for MSN 8937 was recoverable by FWA from VietJet under the indemnities. Any successful claim by VietJet against FWA for their use over that period (whether in conversion or in unjust enrichment) would, therefore, be a cost to add to the amounts awarded to FWA against VietJet under the indemnities. VietJet’s counterclaim therefore fails for circuity of action. Overall conclusions[499]In summary, my conclusions on what FWA is able to recover based on the matters I have set out above are these: i) In relation to its claim to an indemnity under the final paragraph of clause 20.4 in respect of the NEO Aircraft, FWA is entitled to claim only for costs that it had actually incurred. That includes(a) the agreed costs, amounting to $371,859,(b) $5,327,503.87 in respect of the engine shop visit (for engine 771335), and(c) FWA’s claim under FCAS claim 7 (and some parts of FCAS claim 9) in respect of the NEO Aircraft, of which FWA is able to recover: a) Its claim in the amounts claimed for the NEO Aircraft under claims 7(a), 7(c), 9(c), 9(d) and 9(f). b) Under claim 7(b) as to the cost of the parts only (paragraph ‎410 above). ii) Alternatively, FWA is able to recover the difference in value between the NEO Aircraft as they were in fact returned and as in the Return Condition. The diminution in value is to be calculated using Mr Brown’s calculation, but adjusted (i) to change the labour rate in relation to his calculation of the cost of the 6-year check to $75 per hour, and (ii) to remove his adjustments in respect of the Block D upgrades. iii) As to the other claims set out in the FCAS: a) Claim 1: FWA is able to recover in respect of the NEO Aircraft: Mr Brown’s assessment of what is reasonable under claim 1(a), and in the amounts claimed by FWA under claim 1(b) (subject to deduction of $12,533.55) and claim 1(d). In addition, FWA is entitled to recover an amount to be calculated in respect of the CEOs under claim 1(a) as set out at paragraph ‎344 above. b) Claim 2: FWA is able to recover in respect of the NEO Aircraft, subject to the deduction of the duplicate invoice and the storage charge identified at paragraph ‎361 above. c) Claim 5: FWA is able to recover for loss of aircraft maintenance and component utility for the NEO Aircraft in the sum of $538,095.64. d) Claims 6 and 8: FWA is able to recover the costs it claimed for the NEO Aircraft. e) Claim 9: FWA can recover $570,350.46 under claim 9(a), and $1,200 under claim 9(e). iv) FWA succeeds in its claim for lost rent in respect of the NEO Aircraft for the period from 16 December 2022 until 22 May 2025 at the rates identified by Mr Kelly, namely $324,000 per month for MSN 8906 and $305,200 per month for MSN 8937. (For simplicity I have not sought also to summarise here findings I made in respect of other issues (e.g. on the reasonableness of the costs claimed under the clause 20.4 indemnity which I found irrecoverable in principle as not having been incurred).)[500]In respect of those heads of loss where the amounts awarded are not clear from this judgment, I will direct the parties to seek to agree the calculation of the final amounts (with, if necessary, the assistance of their experts). If they cannot agree those calculations, I will determine them on the basis of submissions that can be made at a hearing to determine matters arising out of this judgment, along with issues relating to interest, costs and any other consequential matters.[501]I would like to express my thanks to counsel and solicitors for the assistance that they have given me in relation to this complicated case.