CargoLogicAir Ltd v WWTAI AirOpCo 1 Bermuda Ltd

Permission under paragraph 43 of Schedule B1 to the Insolvency Act 1986 is required for a counterclaim in administration unless it is pleaded solely as a defence by way of set-off. A counterclaim seeking affirmative relief, including delivery up or damages exceeding the company’s claim, requires permission.

Permission should be granted where determining closely connected claims serves the collective interests of creditors, but it may be conditional. The court may require adequate pleading, including the claimant’s best current estimate of its loss, and may prohibit enforcement of any money judgment. A written contract relied on for a central allegation will ordinarily be a key document for initial disclosure.

The claimant leased a Boeing 747-400 from the defendant. After sanctions affecting Russian-owned or controlled aircraft, the lease was terminated and the aircraft was repossessed and sold.

The claimant, which had entered administration, claimed return of a USD 2 million security deposit and damages. The defendant counterclaimed for delivery of aircraft documentation, an indemnity relating to its sale, and loss of rent. The counterclaim had been issued without the administrator’s consent or the court’s permission.

The claimant sought strike-out. The defendant sought permission to amend and proceed with the counterclaim. The court had to determine whether permission was required and, if so, on what terms.

1. Permission requirement. Paragraph 43(6) of Schedule B1 to the Insolvency Act 1986 applied. A counterclaim pleaded solely to raise a defence by way of set-off does not require permission, but the word “solely” is critical. This counterclaim also sought affirmative damages, interest and delivery up, and could exceed any sum due to the claimant. Permission was therefore required. The unauthorised counterclaim was liable to strike out as an abuse of process.
2. Applicable discretion. Permission may be granted retrospectively. The question is whether it would be inequitable to prevent the prospective claimant from proceeding. The court must balance the individual claimant’s interests against the collective interests protected by the administration moratorium. Determining uncertain liabilities may assist the administration, particularly where distributions are under consideration. Proprietary rights receive particular weight. A claim which is partly defensive and closely connected with the company’s own claim will generally be permitted to be determined, although enforcement may be restricted.
3. Terms of permission. Permission was granted for delivery up of the aircraft documentation. Permission was also appropriate for the loss-of-rent claim because the relevant issues were tightly connected with the claimant’s claim and would otherwise have to be resolved in any event. Permission was conditional on the defendant not enforcing or executing any money judgment without the court’s permission or the administrator’s consent.
4. Adequacy of pleading. The court may require a claim to be adequately explained before granting permission. A claimant must provide the best particulars it can currently provide, including a reasonable current estimate or considered range where possible. The defendant’s estimate based on an aircraft with complete documentation did not address the aircraft’s actual condition when returned. Permission to amend and proceed was therefore conditional on pleading the defendant’s best current estimate of market rent for the aircraft in that condition, including its documentation.
5. Sale contract. The sale price itself did not need immediate disclosure. However, the written sale contract was a key document relied on for the indemnity allegation and was necessary for the claimant to plead to that allegation. It had to be disclosed immediately. The Part 18 costs application was premature and there was no order as to its costs.