Kuwait Airways Corporation v Iraqi Airways Company (Nos 4 & 5)
| Jurisdiction | England & Wales |
| Judge | Lord Justice Brooke,LORD JUSTICE PILL,Lord Justice Longmore,LORD JUSTICE LONGMORE,SIR MARTIN NOURSE |
| Judgment Date | 27 March 2002 |
| Neutral Citation | [2002] EWCA Civ 515 |
| Docket Number | A3\2001\1218,Case Nos: QBCMF 98/1234/A3; QBCMF 00/0419/A3; SLJ 00/5954/A3 |
| Court | Court of Appeal (Civil Division) |
| Date | 27 March 2002 |
[2000] EWCA Civ J1110-8
Lord Justice Henry
Lord Justice Brooke and
Lord Justice Rix
Case Nos: QBCMF 98/1234/A3; QBCMF 00/0419/A3; SLJ 00/5954/A3
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE COMMERCIAL COURT
Mance J
Aikens J
Geoffrey Vos QC, Christopher Greenwood QC, Joe Smouha and Sam Wordsworth (instructed by Howard Kennedy for the Claimants)
David Donaldson QC and Stephen Nathan QC (instructed by Landau and Scanlon for the Defendants)
The Judgment of the Court of Appeal
Executive Summary
By this judgment of the court, the Court of Appeal upheld the judgment of Mance J. In particular, it ruled that an English court was entitled to decline to recognise Resolution 369 of the Revolutionary Command Council of Iraq. It held that at all material times Iraq was neither the de facto nor the de jure government of Kuwait; that the resolution was extra-territorial in its effect; and that it would be contrary to English public policy to grant recognition to a resolution which was in breach of clearly established principles of international law (see parts 22–35).
The court also upheld that part of the judgment of Aikens J in which he found that KAC could not recover damages in respect of the loss of the Mosul Four on the ground that those four aircraft would not have been destroyed by Coalition bombing even if IAC had not wrongfully usurped or converted the aircraft. The court upheld the ruling on the facts and upheld his decision on the law because, as required by Iraqi law, KAC was not able to show that the physical damage to the aircraft would not have occurred but for the usurpation (see parts 20–21).
The court allowed KAC's appeal against that part of the judgment of Aikens J in which he held that KAC was not entitled to recover loss flowing naturally and directly from IAC's wrongful usurpation and conversion of the Iran Six. Although it upheld his findings of fact in all material respects, it held that he was wrong to apply a "but for" test as a matter of English law, and that in relation to usurped and converted goods which had not been physically lost or damaged there was no material distinction between the Iraqi law of usurpation and the English law of conversion, which is a tort of strict liability (see parts 36–44).
The action will therefore be remitted to the Commercial Court for an assessment of the damages flowing naturally and directly from the wrongful usurpation and conversion of the Iran Six. The court held that the losses claimed by KAC were in principle foreseeable, and that it was entitled to recover damages in relation to the costs charged to KAC by Iran for their return; the cost of repairing them and reconstructing their maintenance records after their return; and the cost of substitute cargo capacity and substitute passenger capacity pending their return. It held that KAC's loss of profits claim should go forward to assessment. It rejected KAC's claim in relation to the finance costs involved in financing new aircraft ordered by KAC in September 1991 (see parts 45–54).
INDEX
Part
Paragraphs
Introduction
–3
A summary of the facts
–9
1991–2
–30
1993–5
–35
1995–8
–46
Evidential difficulties
–59
Conversion: The facts: Mance J
–68
Conversion: The facts: Aikens J
–74
The development of KAC's "but for" case
–103
Nine discrete topics
–106
The three airfields at Tekrit
–121
Mosul Airfield
–135
The threat to Mosul
–143
The attitude of Jordan
–145
The evacuation of aircraft at the outbreak of hostilities
–165
General Horner's hypothesis about the 11 Iraqi Airfields
–176
The subsequent history of the Iran Six
–180
The relationship between IAC and the Iraqi government
–187
Aikens J's findings as to government involvement
–202
The "but for" test: Aikens J's findings
–228
KAC's challenge to the judge's "but for" findings
–235
The international law dimension
–245
RCC Resolution 369
–247
UN Charter and the Security Council resolutions
–262
The Berman letter
–264
The authorities on the international law dimension
–324
The justiciability of a challenge to RCC Resolution 369
–338
Was Iraq the de facto government of Kuwait?
–360
Should RCC Resolution 369 be characterised as exorbitant?
–371
Is the English public policy exception wide enough?
Can the court take account of Resolution 369's background
and context?
–378
Is Resolution 369 in breach of international law principles?
–383
Do the lex situs rule or the act of state doctrine apply?
–388
The effect of the lex situs rule and double actionability
–394
The letter of 10th September 1990
–398
The Iraqi law of usurpation
–406
English law: introductory
–413
The scope of the law of conversion
–438
The assessment of damages in conversion cases
–484
Conversion, detinue, and the 1977 Act
–488
The modern cases
–518
Damages for conversion: conclusions on recoverability
–524
Remoteness and foreseeability
–538
Remoteness and new intervening cause
–546
The financial claims
–551
KAC's heads of claim
–578
The Airbus purchase contract
–586
The Liesbosch
–598
Fair Market Value (FMV) or Current Market Price (CMP)?
–605
A discount in relation to the Mosul Four?
–620
The Mosul Four: additional heads of claim?
–633
The decision to buy new rather than used aircraft
–642
The finance costs claim
–651
Summary of conclusions on KAC's heads of claim
–653
Conclusion
–655
ANNEX
The disputed movements of 9K-AHD and 9K-AHF
–673
Introduction
This is the judgment of the court to which all its members have contributed. Rix LJ, in particular, is substantially responsible for parts 22–35 and 43–54 of the judgment.
In this matter we have been concerned with two appeals. The first is an appeal by the defendants Iraqi Airways Company ("IAC") from a judgment of Mance J on 29th July 1998 following the trial of issues relating to liability in this action. The second is an appeal by the claimants Kuwait Airways Corporation ("KAC") from a judgment of Aikens J on 5th April 2000 following the trial of issues relating to causation and remoteness. By a Respondents' Notice in that appeal IAC challenge a number of the findings made by Aikens J in his judgment. The judgment of Mance J is reported at [1999] CLC 31, and we will take our page references from that report. The judgment of Aikens J, which was laid out in numbered paragraphs, is reported at [2000] 2 All ER (Comm) 360.
It was arranged that the hearing of the appeal against the judgment of Mance J should be postponed until after judgment had been given at the end of what became known as the stage 2 trial, so that this court would be able to hear both appeals at the same time. This was a sensible course to adopt, and it enabled the court to obtain a clearer picture of all the issues in this case than would have been possible if the two appeals had been heard separately. We are grateful to both parties and their lawyers for the efficient way in which they prepared these appeals. This enabled us to complete the hearing of two very heavy appeals in 11 working days.
A summary of the facts
The appeals arise out of events in Iraq and Kuwait which took place ten years ago. On 2nd August 1990 Iraq invaded Kuwait by force. The occupation was complete by 5th August. On 8th and 9th August the Revolutionary Command Council of Iraq ("the RCC") passed Resolutions 312 and 313. These resolutions proclaimed the sovereignty of Iraq over Kuwait and its annexation to Iraq. Subsequently various Presidential Decrees of the government of Iraq designated Kuwait a "Governate" within Iraq and appointed a Governor of the "Governate of Kuwait".
At the time of the invasion 15 civil aircraft belonging to KAC were standing at Kuwait International Airport. Ten of these aircraft are at the centre of this litigation. The other five were seized and deployed elsewhere by the Iraqi government. They comprised a Boeing 727 owned by the Emir of Kuwait and four smaller aircraft. The ten aircraft with which we are concerned were two Boeing 767s (9K-AIB and 9K-AIC), three A300–600C Airbuses (9K-AHF, 9K-AHG and 9K-AHI), and five A310–200 Airbuses (9K-AHA, AHB, AHC, AHD and AHE). The first four of these aircraft came to be known, for reasons which will become apparent, as the Mosul Four, and the others as the Iran Six. The three A300 Airbuses had been leased to Egyptair in 1988–9 and returned to KAC in May-July 1990. The most valuable of the ten aircraft were the two Boeing 767s, which were built in 1986. The next most valuable were the three A300–600 Airbuses, built in 1984. These were larger and more versatile than the A310s (built in 1983) and were capable of operating in either passenger or cargo mode. KAC and IAC had enjoyed friendly working relations prior to August 1990, and at the time of the invasion there were three IAC pilots in Kuwait on temporary secondment to KAC.
On 6th August 1990 the Iraqi government directed IAC to fly the ten aircraft from Kuwait to the civilian airfield at Basra. Basra is in south-east Iraq, close to the Kuwait border. In the event Airbus 9K-AHI was...
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