Kuwait Airways Corporation v Iraqi Airways Company

A claimant deprived of the use of aircraft may recover user damages for the relevant period. The assessment should reflect the value of the use lost and all surrounding circumstances, including the nature and location of the use, the duration of the deprivation and the creditworthiness of the person responsible. Evidence may justify a premium over an ordinary market rate where those circumstances increase the risk or value of the transaction.

This was the final quantum stage of long-running proceedings between Kuwait Airways Corporation and Iraqi Airways Company. The defendant did not participate in the quantum proceedings or respond to the claimant’s particulars.

The claimant advanced five heads of claim concerning aircraft taken into the defendant’s fleet, substitute capacity, loss of profit and an adjustment to an earlier award. The court considered the evidence and determined the sums recoverable under each head.

1. User damages for the Mosul Four. The claimant was entitled to user damages for the period during which the aircraft were incorporated into the defendant’s fleet before their destruction. The court relied on Kuwait Airways Corporation v Iraqi Airways Company (No 4 & 5), [2002] 2 AC 883, Strand Electric and Engineering Co Ltd v Brisford Entertainments Ltd, [1952] 2 QB 246, and Inverugie Investments Ltd v Hackett, [1995] 3 All ER 841. The appropriate rate required consideration of all the surrounding circumstances, including use in a war zone, the short period involved and the defendant’s poor credit rating. Following Experience Hendrix v PPX Enterprises Inc, [2003] EWCA Civ 323, the court accepted a rate of 2.2 per cent of market value and awarded $19,990,476.
2. Substitute capacity. The court accepted claims for dry-lease costs and associated refurbishment costs of $3,789,312, together with wet-lease costs of $4,787,098, making a total award of $8,576,410.
3. Loss of profit. The court accepted the primary case that the two Airbus aircraft would have been leased to the Kuwaiti Government for passenger carriage at premium rates. It accepted a rate of $5,500 per hour and awarded $28,323,080. The alternative cargo-based claim did not require determination.
4. Iran 6 and AHI. Applying similar considerations, the court awarded $6,561,668 for user damages relating to the Iran 6. It also awarded $624,780 to extend the previously allowed AHI loss-of-profit claim from 17 September to 9 August 1990.

The judgment states that the background and earlier course of the litigation were summarised in judgments dated 12 November 2004 and 14 November 2005. No citations for those judgments are provided. This judgment determined the outstanding quantum issues.