Amiri Flight Authority v Bae Systems Plc and Another
| Jurisdiction | England & Wales |
| Judge | Mr Justice Tomlinson |
| Judgment Date | 20 November 2002 |
| Neutral Citation | [2002] EWHC 2481 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2001 Folio 690 |
| Date | 20 November 2002 |
[2002] EWHC 2481 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
COMMERCIAL COURT
The Honourable Mr Justice Tomlinson
Case No: 2001 Folio 690
Nicholas Underhill QC and Akhil Shah (instructed by Leboeuf Lamb Greene and MacRae) for the Claimant
Michael Crane QC and Bankim Thanki (instructed by Barlow Lyde and Gilbert) for the First Defendants
Philip Shepherd and Stephen Thompson (instructed by Beaumont and Son) for the Second Defendants
Hearing dates : 30—31 October 2002
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Mr Justice Tomlinson:
The Claimant Amiri Flight Authority ("Amiri") is an entity established under the law of the United Arab Emirates. It is akin, although far from identical, to a small private airline, providing aircraft for flights undertaken by local VIPs, sometimes to remote parts. It is said to be (I do not need to decide whether it is) the successor to the rights and obligations of the Private Department ("PD") of the Ruler of Abu Dabi. This case is concerned with a contract dated 7 September 1987 pursuant to which the PD purchased from the First Defendant BAE Systems PLC ("BAE") a BAE 146–100 aircraft together with an associated technical back-up package for the price of US$25,450,000. The aircraft was delivered to the PD in December 1998. The PD's fleet already contained one each of Boeing 707, 737 and 747, two Airbus 300s and three Gulfstream jets and I understand that the fleet has subsequently increased. However for present purposes I must assume that, as is asserted by Amiri, and as I have no reason to doubt, as was known to BAE through its negotiations with it, the PD had only limited technical experience and resources and was unable to undertake all of its own maintenance or any of its maintenance planning. In addition, PD had no experience of operating the BAE 146 aircraft prior to this purchase. One of the contractual obligations undertaken by BAE was the development, in conjunction with the PD, of a Maintenance Programme which was to be finalised three months before the date on which the aircraft was offered by the seller for acceptance by the buyer.
It is common ground that all relevant acts of contract formation in the shape of offer and acceptance took place in Abu Dhabi, where the contract was also signed. In accordance with the terms of the contract delivery of the aircraft took place at Hatfield, although it was not then registered. The aircraft was then flown out of the UK to the UAE where it was registered, a process for which a relevant Certificate of Airworthiness for Export was required and for the issue of which provision was made in the contract.
From 1991 to 1995 Amiri contracted with various aircraft maintenance providers for the supply of certain maintenance services required by the maintenance programme, provided by BAE. From 1995 the Second Defendant, Crossair, was the company which undertook these services together with the provision of a customised maintenance schedule, which they then updated periodically. The provision of maintenance services by Crossair was formalised by a written agreement with Amiri dated 1 January 1996.
Crossair is of course, and was at all material times, a Swiss airline, and it is now the national flag carrier, having changed its name to Swiss International Airlines Limited and using the marketing name "Swiss". Between 1990 and 1996, Crossair operated a fleet of up to six BAE 146 aircraft and subsequent to 1996 operated its successor, the RJ85/100. Of more relevance however for present purposes since 1994 Crossair has had the necessary JAR-145 approval issued under the authority of the JAA (Joint Aviation Authorities) which enables it to offer its services as a maintenance provider in respect of the BAE 146.
As is obvious the maintenance requirements of an aircraft such as the BAE 146 are complex and require substantial documentary support in order that the airworthiness of the aircraft can be maintained. One particular feature of the PD's operation of the aircraft which called for special treatment was the fact that it was a low utilisation regime, when compared to the flying hours typically to be expected of an aircraft operating scheduled services for a regular airline and that it was predominantly, if not exclusively, in areas of high ambient temperature and humidity. Following the purchase of the aircraft, Amiri made numerous requests to BAE for advice on changes to the maintenance programme. It is Amiri's case, as I shall explain in more detail hereafter, that BAE provided this advice as part of the performance of its obligations under the contract.
For the purposes of the present applications I must assume that an inspection of the aircraft by Amiri in October 1998 revealed corrosion in the horizontal and vertical stabilisers and corrosion on the fuselage skin. I must assume that prior to that date Amiri had not been aware of any material corrosion on the aircraft. I must further assume that the C-Check inspection of the aircraft by Crossair in May 1999 revealed extensive corrosion, amongst other places in the left and right fuel tanks outboard of the outer engines of the aircraft. Further, I must assume that the corrosion in the fuel tanks was so severe that the aircraft was no longer airworthy and that it was grounded after the discovery of the corrosion. The aircraft was then stored at Crossair's facilities in Basel, Switzerland. Again, I assume for present purposes that the corrosion in the fuel tanks was caused by microbiological fungal contamination. The relevant bacteria or spores, cladosporium resinae, may be introduced into fuel tanks by contaminated fuel. The fungal growth produced flourishes at the interface between fuel and water—fuel can contain dissolved water which settles out and water can be formed when moisture in the atmosphere condenses on the exposed internal surfaces of the tanks. Low utilisation in areas of high ambient temperatures and humidity can provide ideal conditions for proliferation of the fungus. As it grows, cladosporium produces a corrosive acid. Corrosion caused by such contamination is a known risk against which measures can be, and are, routinely taken. In 2000 Amiri sold the aircraft on the best terms available. The sale, on 29 October 2000, realised US$2,600,000 as against a benchmark market value for an aircraft of similar age in the condition reasonably to be expected of an aircraft of such age of US$10,700,000.
Amiri allege that the corrosion problem, and thus their loss, was caused by breaches of contract by both BAE and Crossair. As against BAE, it is said that it failed to exercise reasonable skill and care in developing the maintenance programme required pursuant to the contract. In addition to the obligation in respect of development of that programme, the contract also imposed upon BAE an obligation to provide technical advisory assistance with respect to the aircraft. Possibly for tactical reasons Amiri do not put in the forefront of their case that such technical advisory assistance as was provided by BAE was given without the requisite reasonable care and skill, although that point is made in their Reply. It seems to me likely to be the better way of putting their case, and I assume that it is fairly arguable. Amiri also contend that BAE owed it parallel duties of care in tort. This adds nothing of substance but it may be relevant to issues of limitation with which I am not presently concerned. Amiri places specific reliance on a series of communications between 1989 and 1998 in which maintenance procedures were discussed. It is alleged, and I shall assume, that the advice provided by BAE in faxes of 19 May 1996, 3 December 1996 and 7 January 1998 was all furnished in performance of a contractual obligation imposed by the 1987 contract. If that advice was causatively negligent, Amiri's cause of action in respect thereof is not time-barred.
Crossair's contractual obligations to Amiri included the provision of a customised Maintenance Schedule reflecting the aircraft's specific operational and environmental conditions and the performance of maintenance checks and rectification work, including annual C-Checks. Amiri allege that Crossair failed to exercise reasonable skill and care in these functions, and in particular that they failed to identify the corrosion present at an early stage, for example, during or after the C-Checks of the left wing fuel tanks in May 1996 and May 1998 and of the right wing fuel tanks in May 1997.
Both BAE and Crossair deny the allegations made against them and in turn allege that Amiri cannot have been carrying out, properly or at all, the water drainage and fuel testing regime which they claim to have followed. Had they done so, it is asserted, the extent of the contamination must surely have been discovered earlier.
Crossair have in turn issued Part 20 proceedings against BAE. In those proceedings they claim to be entitled to be indemnified by BAE against any liability they may have to Amiri. They put their case in two ways. Firstly, they rely upon the provisions of Section 1 of the Civil Liability (Contribution) Act 1978. Secondly however they allege that BAE owed to them as a maintenance provider a direct tortious duty of care. In this regard Crossair adopts wholesale the allegations of negligence made by Amiri against BAE and adds to them a series of allegations which can be summarised as amounting to reliance upon BAE's failure to take adequate measures...
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Amiri Flight Authority v BAE Systems Plc
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