Kuwait Airways Corporation v Iraqi Airways Company and another
| Jurisdiction | England & Wales |
| Judge | Mr Justice Cresswell |
| Judgment Date | 12 November 2004 |
| Neutral Citation | [2004] EWHC 2603 (Comm) |
| Docket Number | Case No: 1991/2587 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 12 November 2004 |
[2004] EWHC 2603 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEENS'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr Justice Cresswell
Case No: 1991/2587
Mr Geoffrey Vos QC, Mr Joe Smouha QC and Mr Andrew Twigger (instructed by Howard Kennedy) for the Claimant
Mr Rhodri Davies QC and Mr D Spitz (instructed by Kendall Freeman) for the Defendant until August 2004
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.
INDEX
INTRODUCTION
The nature and control of KAC's stock of spares, paragraph 17.
Commencement of Proceedings, paragraph 35.
Hearings before Evans J, paragraph 37.
Appeals from Evans J, paragraph 43.
The Trial before Mance J, paragraph 47.
The Trial before Aikens J, paragraph 52.
The Appeals to the Court of Appeal, paragraph 55.
The Appeals to the House of Lords, paragraph 60.
The Assessment of Damages in the Main Aircraft Action, paragraph 62.
The Petition to the House of Lords to Rescind its 1995 Decision, paragraph 68.
The Perjury Action, paragraph 72.
The Perjury II Action, paragraph 78.
The Adjournment of the Spares Trial, paragraph 81.
Political developments, paragraph 86.
The Discovery of KAC's Spares in Iraq, paragraph 91.
Developments between July and November 2003, paragraph 96.
The Spares Action CMC on 18 December 2003, paragraph 110.
The Spares Action CMC on 30 January 2004, paragraph 114.
The Spares Action CMC on 27 February 2004, paragraph 118.
The Spares Action CMC on 26 March 2004, paragraph 131.
The Discovery of IAC's Documents in Iraq, paragraph 139.
Admissions by IAC, paragraph 150.
The Spares Action PTR on 30 April 2004, paragraph 155.
Tests in relation to KAC's data, paragraph 156.
Aircraft operated by KAC on 2 August 1990, paragraph 162.
Dates of Delivery of KAC's New Aircraft, paragraph 163.
EVIDENCE
Unchallenged witness statements on behalf of KAC, paragraph 164.
Witnesses called to give evidence by KAC, paragraph 186.
Expert Evidence, paragraph 216.
THE RELEVANT LEGAL PRINCIPLES
The tort of conversion, paragraph 219.
The normal measure of damages, paragraph 225.
Accountability for benefits received, paragraph 233.
User Damages, paragraph 234.
Intervening acts and the costs of recovery and repair, paragraph 242.
Consequential Loss, paragraph 243.
Assessment of the market value of the goods at the time the defendant converted them, paragraph 246.
Betterment and new for old, paragraph 251.
DATA ISSUES
Are there grounds for concluding that KAC's remaindered and recovered data is materially inaccurate or unreliable and, if so, to what extent? paragraph 252.
Is any credit to be given to IAC for negative quantities and, if so, how much? paragraph 276.
Is the otherwise agreed credit for unmatched parts to be reduced to take account of credit given for negative quantities and, if so, by how much? paragraph 285.
Should any deductions be made from the Working Schedule to account for spares carried on the Iran Six or the Mosul Four? paragraph 292.
What deductions should be made from the Working Schedule to account for spares held at Cairo? paragraph 296.
Is KAC's claim for Simulator Spares barred by the consent order of Langley J dated 4 May 2001? paragraph 305.
QUANTUM ISSUES
Is 100% MLP the correct starting point for KAC's claim in respect of the spares in the Working Schedule, and, if not, what is the correct starting point? paragraph 319.
Should KAC's claim be reduced below 100% MLP because some of its spares became surplus after KAC's return to KIA and, if so, by how much? paragraph 331.
Should KAC's claim be reduced because of betterment and, if so, by how much? What percentage should be deducted from what figure to take account of betterment? paragraph 344.
Could KAC have obtained a bulk purchase discount and, if so, how much, and what is the effect of such a discount on KAC's claim? What percentage should be deducted from what figure to take account of bulk purchase discount? paragraph 345.
Is KAC entitled to an additional 3.75% in respect of AOG purchases? paragraph 346.
Is KAC entitled to an additional 4% in respect of customs duty? paragraph 347.
How much credit should IAC be given for remaindered and recovered spares? paragraph 348.
Is KAC entitled to $783,568 in respect of warehousing costs for spares, and, if not, how much? paragraph 355.
How much is KAC entitled to claim in respect of Post Invasion Purchases? paragraph 360.
Should $398,614 be deducted from KAC's claim in relation to engine number P701652, or any, and, if so, what sum? paragraph 362.
Is KAC entitled to $3,200,000 in respect of a replacement engine for engine number P689597, or only $1,430,105, or how much? paragraph 363.
Is KAC entitled to user damages, and, if so, how much? paragraph 371.
CONCLUSION
paragraph 482.
In this action, the Spares Action, IAC has admitted liability from 9 August 1990 for conversion of KAC's aircraft spare parts at Kuwait International Airport, but disputes the appropriate level of quantum. The background to and history of this complex litigation is set out in the Introduction below.
IAC was represented by Mr Rhodri Davies QC and Mr D Spitz (instructed by Kendall Freeman) until August 2004. I refer to my judgment dated 4 October 2004 for an account of the involvement of Ross & Craig and Mr S Nathan QC. For the reasons set out in that judgment I granted relief from sanctions and an adjournment of one week from 27 September to 4 October. In the event IAC was not represented for the balance of the hearing (as to user damages) on 4,5,6 and 7 October. But the report of Mr Beyer was placed before the Court (see paragraph 218 below). Further Mr Davies had provided some submissions in relation to user damages in July. IAC has since 4 November been represented by Teacher Stern Selby.
On 15 July I ordered IAC to pay KAC by way of interim payment the sum of US$148,468, 609 (being the sum of US$78,183,155 together with interest of US$ 70,285,454).
INTRODUCTION
On 2 August 1990 Iraq invaded Kuwait.
At the time of the invasion KAC operated 19 commercial aircraft. There were four Boeing 727s, three Boeing 767s, four Boeing 747s, three Airbus A300s and five Airbus A310s (one of the B727s was a Kuwaiti Government owned aircraft for which KAC was responsible). The details of these aircraft are set out at para 162 below. KAC also operated four smaller executive jets.
In order to operate these aircraft, KAC stored a substantial number of spare parts at Kuwait International Airport ("KIA"). The spares (apart from a number of spare engines, which were kept separately) were recorded in a highly sophisticated computer log-in system known as the Materials, Services and Controls System ("MSCS") which had been in place from around the mid-1980s.
Ten of the large commercial aircraft belonging to KAC were standing at KIA on 2 August 1990. These were two of the Boeing 767s, all three Airbus A300s and all five Airbus A310s. On 6 August 1990 the Iraqi Minister of Transport and Communications, Mr Al-Zubaidi, instructed Mr Saffi, then IAC's director general and chairman of the board, to fly these ten aircraft to Iraq for "safe keeping". Pursuant to that order, all but one of the aircraft were flown to Basra in the course of the next few days. The remaining aircraft (an Airbus A300 with registration AHI), which was under repair, did not leave until 22 August 1990 when it was flown direct to Baghdad.
On 8 and 9 August 1990 the Revolutionary Command Council ("RCC") of Iraq passed resolutions 312 and 313 which prescribed the integration of Kuwait into Iraq and the assumption by Iraq of responsibility for all Kuwaiti financial obligations. A copy of these resolutions was sent to IAC with the added notation, "Kindly take appropriate action for implementation thereof".
On 9 August an IAC delegation went to KIA. It was led by Mr Abbo (then IAC's Director of Quality Control), whose report of the visit refers to "the possibility of making use of the ground support equipment for aircraft maintenance". The next day, Mr Saffi flew to KIA to see the position for himself. A diary kept by Mr Nuaman Na'ama ("the Na'ama Diary"), then IAC's director of engineering, records that on 13 August 1990, Mr Saffi gave the following instructions: "Take materials out of the stores at a minimum. Abbo instead of Muwaffaq al-Salman. Full inventory with numbers…" Thereafter further orders were given to take a full inventory of all KAC's spares at KIA, transfer them to Baghdad and enter them into IAC's stores. (See e.g. Minutes of the meeting with the Director General of 22 August 1990 and 28 August 1990). Such an inventory was probably prepared at latest by 23 September 1990 but has not been disclosed.
By the end of November 1990 four of KAC's aircraft (the two Boeing 767s and two of the Airbus A300s) were at Mosul where they remained until they were destroyed by coalition bombing during the Gulf War. These aircraft have become known in the proceedings between KAC and IAC as the "Mosul Four". The other six aircraft (the five Airbus A310s and one A300) were, at that stage, all at Baghdad, but between mid-January and early February 1991 they were evacuated by IAC to Iran. There they remained until KAC was able to recover them in July and August 1992. KAC had to pay $20 million to the government of Iran in order to achieve this. These aircraft have become known as the "Iran Six".
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