Gain Aircraft Ireland Ltd v (1) PJSC Aeroflot - Russian Airlines (2) JSC Rossiya Airlines
On 25 May 2023, Simon Salzedo KC (sitting as a Deputy High Court Judge): (i) set aside a judgment in default for $57,498,399 entered against Rossiya Airlines (“RA”) by Gain Aircraft (“Gain”); and (ii) awarded Aeroflot its costs on the indemnity basis following Gain’s discontinuance of a claim against it.
Gain is the owner of two Airbus A319 aircraft that were leased to RA under separate lease agreements. RA’s obligations under the leases were guaranteed by Aeroflot by deed, with disputes under the deeds (but not the leases) being subject to an exclusive arbitration clause. Following Council Regulation (EU) 2022/328 of 25 February 2022 (which restricted the provision of insurance and reinsurance services), Gain purported to terminate the leases and demand the return of the aircraft. The aircraft were not returned: Gain therefore issued invoices for the total value of the aircraft and ultimately proceeded to issue a claim against RA (under the leases) and Aeroflot (under the guarantees). After RA failed to acknowledge service, Gain applied for default judgment against RA, which was granted by the order of Mr Justice Andrew Baker. Gain later also applied for default judgment against Aeroflot, which was granted by the order of Mr Justice Picken.
On 28 October 2022, OFSI issued a general licence for litigation which had the effect of enabling RA to instruct English lawyers and pay the issue fee for an application. Thus, RA applied to set aside the default judgment under CPR r13.3. Aeroflot later issued an application to contest jurisdiction under CPR 62.8 and section 9 of the Arbitration Act 1996.
As to the set aside, the Judge found that RA had both: (i) reasonable prospects of defending the claim both on issues of liability and quantum; and (ii) had some other good reason to be allowed to defend the claim. A number of interesting questions were addressed, including:
- The extent to which CPR r3.9 (and the Judgment of the Court of Appeal in Denton) applies to set aside applications (if at all);
- By reference to what standard were the merits of a defendant’s defence to be assessed? Specifically, whilst Gain had never served particulars of claim (and instead had set out its case in brief terms on a claim form), it nevertheless went on to provide further particulars in reply evidence and submissions; and
- On which party does the burden lie and in what circumstances can it shift?
Ultimately, the Court exercised its discretion in favour of setting aside the default judgment.
As to the jurisdiction challenge, Gain discontinued its claim against Aeroflot shortly before the hearing of the application. Aeroflot therefore sought its costs under CPR r38.6 to be assessed on the indemnity basis by reason of: (i) Gain’s conduct generally; and (ii) Gain’s bringing the claim in the High Court constituting a breach of an arbitration agreement.
In making an award of indemnity costs, the Judge followed the same reasoning as applied in A v B & Ors [2007] EWHC 54 (Comm), namely that indemnity costs were appropriate where a claim is issued in breach of an arbitration agreement as this measure can stand proxy for the losses (legal fees) that were caused by that breach. As a result, the Judge did not need to consider Aeroflot’s other conduct arguments.
Andrew Lomas appeared for Aeroflot and RA, instructed by Quillon Law LLP. A link to a transcript of the Judgment will be posted here when it becomes available.