Aercap Ireland Ltd (on its own behalf and on behalf of all those insured under policy UMR B1752GE2100325000) v AIG Europe S.A. (on its own behalf and on behalf of all underwriters subscribing to Section One of policy UMR B1752GE2100325000)

JurisdictionEngland & Wales
JudgeMr Justice Butcher
Judgment Date25 January 2023
Neutral Citation[2023] EWHC 96 (Comm)
Docket NumberCase No: CL-2022-000294
CourtQueen's Bench Division (Commercial Court)
Between:
Aercap Ireland Limited (on its own behalf and on behalf of all those insured under policy UMR B1752GE2100325000)
Claimant
and
(1) AIG Europe S.A. (on its own behalf and on behalf of all underwriters subscribing to Section One of policy UMR B1752GE2100325000)
(2) Lloyd's Insurance Company S.A. (on its own behalf and on behalf of all underwriters subscribing to Section Three of policy UMR B1752GE2100325000)
Defendants
and
Fidelis Insurance Ireland Dac
Applicant

[2023] EWHC 96 (Comm)

Before:

THE HON Mr Justice Butcher

Case No: CL-2022-000294

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES

KING'S BENCH DIVISION

COMMERCIAL COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Dominic Kendrick KC, Peter MacDonald Eggers KC and Rebecca Jacobs (instructed by Reynolds Porter Chamberlain LLP) for the Applicant

Stephen Midwinter KC and Edward Ho (instructed by Herbert Smith Freehills LLP) for the Claimant

Gavin Kealey KC, Andrew Wales KC and David Murray (instructed by Holman Fenwick LLP) for the First Defendant

Richard Waller KC and Michael Ryan (instructed by Kennedys Law LLP) for the Second Defendant

Hearing date: 13 January 2023

Approved Judgment

This judgment was handed down remotely at 10.00am on Wednesday 25 January 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives (see eg https://www.bailii.org/ew/cases/EWCA/Civ/2022/1169.html).

Mr Justice Butcher Mr Justice Butcher
1

This is an application by the Applicant, Fidelis Insurance Ireland DAC (‘Fidelis’) to be joined as the Third Defendant to these proceedings, and for consequential directions to be given.

2

At the conclusion of the hearing on 13 January 2023, I told the parties that the application to join would be granted, and that I would give reasons for that decision in due course. These are those reasons.

Background

3

The background may, in large part, be taken from the Claimant's (‘AerCap's’) Skeleton Argument, and, as far as material, is as follows. This summary is not intended to be contentious or to decide any matter which may be in dispute between the parties.

4

Following the Russian invasion of Ukraine, the EU, and subsequently the UK, imposed sanctions prohibiting AerCap and other related lessors (collectively the ‘Insureds’) from continuing the leasing of aircraft and aircraft parts to Russian airlines, with effect from 28 March 2022. Between 2 and 9 March 2022, notices were issued by AerCap and its related lessor entities to their Russian lessees, terminating the leasing of all aircraft and engines which had been on lease to them, and requiring those lessees to return the assets to specified locations. In the majority of cases the lessees declined to do so.

5

The Defendants are the insurers under Section One (‘All Risks’) and Section Three (‘War Risks’) of the Insureds' aircraft hull, spares and equipment policy for the period 1 November 2021 to 31 October 2022 (‘the Policy’).

6

On 10 March 2022 AerCap wrote to its insurers under Section One and Section Three of the Policy notifying them of what was said to be the ‘happening of an event likely to give rise to a claim.’ On 24 March 2022 AerCap submitted a claim to those insurers seeking an indemnity of nearly US$3.5 billion in respect of what was said to be a total loss of 116 aircraft and 23 engines which had not been returned by lessees contrary to AerCap's request. AerCap advanced its claim principally under Section One, with an alternative claim under Section Three.

7

The insurers did not accept AerCap's claims. AerCap proceeded to issue the present proceedings on 9 June 2022. The claim is advanced against Section One insurers in the amount of some US$3.5 billion. The alternative claim against Section Three insurers is, as is common ground, capped at the Section Three aggregate limit of US$1.2 billion.

8

The way in which AerCap advanced its claim, in its Claim Form, was as a representative action, whereby the First Defendant (‘AIG’) was sued as a representative on its own behalf and on behalf of the Section One insurers; and the Second Defendant (‘LIC’) was sued as a representative on its own behalf and on behalf of the Section Three insurers.

9

Fidelis is one of a number of insurers which subscribed to both Section One and Section Three of the Policy. On 22 August 2022, shortly before the First and Second Defendants served their defences, solicitors instructed on behalf of Fidelis wrote to the parties seeking their consent to Fidelis being joined to the action. As, in the event, neither the First Defendant nor AerCap consented to the joinder, Fidelis issued the present application on 22 September 2022.

The CPR

10

Fidelis's application is brought primarily under CPR r. 19.2. This provides, in part, as follows:

19.2—Changes of parties—general

19.2 (1) This rule applies where a party is to be added or substituted except where the case falls within rule 19.5 (special provisions about changing parties after the end of a relevant limitation period).

(2) The court may order a person to be added as a new party if—

(a) it is desirable to add the new party so that the court can resolve all the matters in dispute in the proceedings; or

(b) there is an issue involving the new party and an existing party which is connected to the matters in dispute in the proceedings, and it is desirable to add the new party so that the court can resolve that issue.

11

It is also germane to refer to the terms of CPR r. 19.6. It provides in part: 19.6—Representative parties with same interest

(1) Where more than one person has the same interest in a claim—

(a) the claim may be begun; or

(b) the court may order that the claim be continued,

by or against one or more of the persons who have the same interest as representatives of any other persons who have that interest.

(2) The court may direct that a person may not act as a representative.

(3) Any party may apply to the court for an order under paragraph (2).

(4) Unless the court otherwise directs any judgment or order given in a claim in which a party is acting as a representative under this rule—

(a) is binding on all persons represented in the claim; but

(b) may only be enforced by or against a person who is not a party to the claim with the permission of the court.

The Parties' Positions

12

Fidelis's contentions may be summarised as follows:

(1) That a representative action is a procedural device which operates as a matter of convenience. It does not, and was never intended to, cut across the principle that a party against whom an enforceable judgment is claimed should be entitled to defend that claim by its own lawyers at its own risk and expense.

(2) A claimant is not entitled, by the simple act of selecting a representative action, to preclude a defendant, especially one with a large financial exposure, from defending the action in the way it wishes, by its chosen lawyers. A fortiori a co-defendant had no right to do so, but that is exactly what AIG is seeking to do.

(3) A distinction must be drawn between the right of a party to defend a claim against it as it chooses and with lawyers of its choice, and matters of case and trial management. Fidelis accepts that it should not be entitled unnecessarily to lengthen the trial, repeat submissions or duplicate evidence. All these can be prevented by the exercise of the court's case management powers. That is a different matter from whether it should be permitted to be joined to the proceedings.

(4) Insofar as relevant, Fidelis has good reasons for wanting to conduct its own defence. In particular it wishes to put forward a consistent position across its whole book of business: namely that there is no loss within the scope of the Policy, or of similar contingent policies, but if there is, it was caused by an All Risks peril. Moreover, Fidelis, or related entities, is facing bad faith allegations in Florida and California which appear to rely in part on the representative defence filed on behalf of Fidelis and others in the present action as being inconsistent with its stance in the US litigation.

(5) A representative action was not the only, or indeed the obvious, way in which these proceedings could have been structured. In other English proceedings involving similar claims, each insurer has been sued individually. In particular, this is the case in the proceedings issued by Dubai Aerospace and Falcon 2019–1 Aircraft 3 Limited, in which Fidelis has or will serve one defence, which responds to all claims against it.

13

The position of the other parties may be summarised as follows:

(1) AerCap did not initially oppose Fidelis's conducting its own defence, provided that neither AIG nor LIC objected. In the end AIG did object, and on that basis AerCap did not consent. But in its Skeleton Argument, and in Mr Midwinter KC's submissions, AerCap made it clear that its ‘sole concern’ is to ensure that the proceedings are conducted as efficiently as possible, and that if Fidelis's joinder was not permitted to lead to duplication and waste, it did not object to it.

(2) AIG has objected to the joinder of Fidelis. It contends that the requirements for the joinder of a party under CPR r.19(2) are not met. Fidelis can be represented by LIC, with whose interests its are entirely aligned. There is also no problem in Fidelis being...

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