Spicejet Ltd v De Havilland Aircraft of Canada Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Nugee,Lord Justice Phillips |
| Judgment Date | 07 December 2021 |
| Neutral Citation | [2021] EWCA Civ 1834 |
| Docket Number | Case No: A4/2021/0598 |
| Year | 2021 |
| Court | Court of Appeal (Civil Division) |
[2021] EWCA Civ 1834
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT (QBD)
SIR MICHAEL BURTON GBE
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Phillips
and
Lord Justice Nugee
Case No: A4/2021/0598
Akhil Shah QC and Laurentia De Bruyn (instructed by K&L Gates LLP) for the Appellant
Jasbir Dhillon QC and Tom Wood (instructed by Pinsent Masons LLP) for the Respondent
Hearing date: 21 July 2021
Approved Judgment
By application notice dated 23 March 2021 the respondent (“De Havilland”) applied for (i) an order that this appeal be struck out pursuant to CPR 52.18(1)(a) unless the appellant (“SpiceJet”) paid US$42,950,000 (or such other sum as this Court might determine) into court and/or (ii) an order that SpiceJet provide security for costs of the appeal.
At the end of the hearing of the application on 21 July 2021 we made an order that (i) unless SpiceJet paid the sum of £5,000,000 into the Court Funds Office by 4pm on 18 August, its Appellant's Notice was to stand struck out without further order and (ii) there be no order for security for costs of the appeal. We indicated that the reasons for our decision would follow in writing.
On 16 August 2021 SpiceJet applied for an extension of time in which to make the payment into court, seeking an additional 60 days. Nugee LJ and I refused that application on the papers, with reasons to follow.
This judgment sets out my reasons for making the decisions referred to above.
The background
On 23 February 2021 Sir Michael Burton GBE (“the Judge”) granted De Havilland summary judgment on its claim in these proceedings against SpiceJet. In addition to declaring that De Haviland had been entitled to terminate the Purchase Agreement between the parties and its obligation to deliver to SpiceJet any further Q-400 aircraft thereunder, the Judge ordered SpiceJet to pay De Havilland US$42,950,000 as liquidated damages together with accrued interest of US$1,149,649.61 (“the Judgment”). The Judge also awarded De Havilland the costs of the claim (including an interim payment of US$330,000 to be paid by 9 March 2021).
In relation to the award of liquidated damages, the Judge in his reserved judgment considered in detail SpiceJet's case that it was arguable that the award was not a genuine pre-estimate of damages, but amounted to a penalty. He concluded at [34] as follows:
“[SpiceJet] neither in evidence nor through counsel made any attempt to cast doubt on the realistic nature of this estimate, which was agreed at the time. In all the circumstances, and for the reasons given by [De Havilland], I am satisfied that the sum per aircraft calculated and agreed as a pre-estimate of loss in Article 15.4(c) [of the Purchase Agreement] is not an irrecoverable penalty.”
The Judge granted SpiceJet permission to appeal on one ground, namely, whether (as a matter of contractual interpretation) the parties' agreement of a Change Order (No. 6) suspending the scheduled delivery date for certain aircraft also had the effect of suspending or extinguishing SpiceJet's accrued obligations to make pre-delivery payments for those aircraft, describing that ground as “just a squeaker of an argument” 1. De Havilland did not invite the Judge, in granting permission, to make the grant conditional on SpiceJet paying the Judgment sum or any part of it. It should be noted
that the Judge refused SpiceJet permission to appeal on the question of whether the liquidated damages were a penalty and, what is more, SpiceJet did not renew its application for permission to appeal on that ground before this CourtAt the same hearing SpiceJet applied to the Judge for a stay of execution pending appeal, contending that it was in a precarious financial situation and should not be exposed to execution (and likely insolvency proceedings) until it had had a chance to overturn the Judgment. The Judge refused a stay and ordered that SpiceJet pay £12,000 in costs in respect of that application, also by 9 March 2021. The Judge took the view that a stay was not necessary because it was unlikely that De Havilland would be able to enforce the Judgment against SpiceJet in India before the appeal was heard. He further expressed the view that SpiceJet's chairman and majority shareholder 2, Ajay Singh, “is going to think it worthwhile putting some money in” to SpiceJet, despite evidence from SpiceJet's senior vice president (legal) and company secretary, Chandan Sand, that “Mr Singh is not in a position to invest more into SpiceJet at this stage”.
SpiceJet duly made the interim payment on account of costs and paid the costs of the stay application by 9 March 2021, but paid no part of the Judgment sum. As already indicated, De Havilland issued its application on 23 March 2021 3.
On 3 June 2021 De Havilland issued a Petition in the High Court of Delhi seeking to enforce the Judgment. The following day an order was made by Justice Midha requiring SpiceJet to file its Objection and Reply within four weeks. A further order that SpiceJet file an affidavit of its assets within 30 days was subsequently overturned by SpiceJet on appeal.
SpiceJet's Objection and Reply was dated 2 July 2021 and extended to 44 pages. Among the points taken in opposition to the enforcement of the Judgment was that the Judgment was unenforceable in India as it was founded on a breach of the law in force in India and/or had not been given on the merits of the case. The basis for that contention was that the sum awarded as damages “is in the nature of a penalty” and had been awarded “without undertaking the investigation of the loss suffered by [De Havilland]. Thus the [Judgment] of damages has not been given on the merits of the case”.
In the meantime, on 5 June 2021, an article appeared in the Financial Times reporting that Mr Singh had prospered financially during the pandemic by branching out into Covid-19 testing and genomic sequencing. The article concluded by stating that, despite SpiceJet's financial problems, Mr Singh had been shortlisted as a bidder for Air India, an acquisition that would require him to take on US$3.3 billion of debt.
The application for an unless order
The applicable rules and principles
CPR 52.18 provides as follows:
“(1) The appeal court may –
(a) strike out the whole or part of an appeal notice;
(b) set aside permission to appeal in whole or in part;
(c) impose or vary conditions upon which an appeal may be brought.
(2) The court will only exercise its powers under paragraph (1) where there is a compelling reason for doing so.
(3) Where a party was present at the hearing at which permission was given, that party may not subsequently apply for an order that the court exercise its powers under subparagraphs (1)(b) or (1)(c).”
As De Havilland was present and represented at the hearing on 23 February 2021 when the Judge granted permission to appeal (and did not ask that conditions be imposed), it was clearly debarred by CPR 52.18(3) from asking this Court to impose a condition under CPR 52.18(1)(c). Nevertheless, De Haviland invited the Court to strike out the appeal under CPR 52.18(1)(a) if SpiceJet did not comply with a requirement to pay the Judgment sum into court: this was plainly asking for the imposition of a condition by another route.
It is nevertheless clear that the Court has jurisdiction to make such an order. In Contract Facilities Limited v The Estate of Rees [2003] EWCA Civ 1105 Waller LJ, giving the judgment of the court, stated at [21]–[22]:
“The court of appeal has the power to manage its own cases. It would be very strange if CPR [52.18] prevented the court of appeal imposing conditions under its case management power where circumstances during the currency of the appeal made it appropriate either to stay the appeal or stay the appeal subject to conditions. …
It seems clear that the court of appeal has case management powers in addition to those that it may have under CPR 52. Furthermore it seems to us that the application that is now before us is an application made during the currency of an appeal where the court is being asked to consider whether to exercise its case management powers by reference to conduct while the appeal is pending. That is totally different from the application before His Honour Judge Weeks. In our view the court of appeal has jurisdiction to deal with this application and it is not inappropriate to consider the making of the order asked even though the respondents did seek to impose conditions on the permission to appeal before His Honour Judge Weeks.”
However, in Spar Shipping v Grand China Logistics Holding (Group) Co Limited [2016] EWCA 520 Longmore LJ explained the rationale of CPR 52.18(3) at [15] as follows:
“The whole point, it seems to me, of [52.18(3)] is to avoid the enormous potential expense and time taken in applications of this kind…The whole point is that these considerations should be advanced to the judge at the time he is minded to grant permission to appeal so that he can have them in mind and so an order can be made at a time when considerable sums of money and further time is not required for consideration of these matters.”
Longmore LJ then cited the passages referred to above from Contract Facilities, noting that Waller LJ had concluded that there was jurisdiction to entertain the...
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