Case Nos: CL-2022-000294; CL-2022-000557; - [2025] EWHC 2529 (Comm)

AerCap Claim

I will consider first the issues as to costs which arise in the context of the AerCap claim. There were seven principal points: (a) incidence of costs; (b) whether there should be liability on a joint or several basis; (c) the impact of settlements; (d) whether War Risks Insurers should bear any costs awarded in favour of HFW AR Insurers; (e) the rate of interest on costs; (f) the amount of any payment(s) on account; and (g) the position of Swiss Re.

Before examining these issues in turn, it is helpful to recall the parameters within which the court approaches issues of costs. Thus CPR r. 44.2 provides, in part:

The court has discretion as to –

whether costs are payable by one party to another;

the amount of those costs; and

when they are to be paid.

If the court decides to make an order about costs –

the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party; but

the court may make a different order.

...

In deciding what order (if any) to make about costs, the court will have regard to all the circumstances, including –

the conduct of all the parties;

whether a party has succeeded on part of its case, even if that party has not been wholly successful; and

any admissible offer to settle made by a party which is drawn to the court’s attention, and which is not an offer to which costs consequences under Part 36 apply.

The conduct of the parties includes –

conduct before, as well as during, the proceedings and in particular the extent to which the parties followed the Practice Direction – Pre-Action Conduct or any relevant pre-action protocol;

whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;

the manner in which a party has pursued or defended its case or a particular allegation or issue;

whether a claimant who has succeeded in the claim, in whole or in part, exaggerated its claim; and

whether a party failed to comply with an order for alternative dispute resolution, or unreasonably failed to engage in alternative dispute resolution.

The orders which the court may make under this rule include an order that a party must pay –

a proportion of another party’s costs;

a stated amount in respect of another party’s costs;

costs from or until a certain date only;

costs incurred before proceedings have begun;

costs relating to particular steps taken in the proceedings;

costs relating only to a distinct part of the proceedings; and

interest on costs from or until a certain date, including a date before judgment.

Before the court considers making an order under paragraph (6)(f), it will consider whether it is practicable to make an order under paragraph (6)(a) or (c) instead.

Where the court orders a party to pay costs subject to detailed assessment, it will order that party to pay a reasonable sum on account of costs, unless there is good reason not to do so.

…”

Helpful also is the summary of the court’s approach given in Serious Fraud Office v Litigation Capital Ltd [2021] EWHC 2803 (Comm) at [29]-[30] by Foxton J:

There was no significant dispute as to the general principles relevant to liability for costs, which is not, perhaps, surprising because there is something in them for everyone. The general rule is that the unsuccessful party will be ordered to pay the costs of the successful party (CPR r.44.2(2)), but the Court may make a different order having regard to all the circumstances. First instance judges have been warned against departing too readily from the starting point that the successful party gets its costs (Fox v Foundation Piling Ltd [2011] EWCA Civ 790, [2011] 6 Costs LR 961, [62],), although I accept that such orders are not to be described as exceptional.

Further:

There is no automatic rule that the costs of a successful party will be reduced because it lost on some issues, and it has been noted that in complex litigation, it is a rare party who succeeds on every point it argues (see e.g., Travellers' Casualty and Surety Co of Canada v Sun Life Assurance [2006] EWHC 2885 (Comm), [12] and F&C Alternative Investments (Holdings) Ltd v Barthelemy [2011] EWHC 2807 (Ch), [2012] Bus LR 891, [16]-[21],).

There are various factors which are likely to weigh in the balance when determining whether to make such an order, although these are inevitably matters of weight rather than independently determinative considerations. The more significant and self-contained the issue on which the successful party has lost, the more likely it is that some downwards costs adjustment for that failure is appropriate. Failure on an argument which was simply an alternative route to the same substantive relief as that obtained may provide a less compelling case for a downwards adjustment than (for example) a party who seeks to recover some further relief and fails. The unreasonableness of taking the unsuccessful point is also a relevant consideration, but that does not mean that an adjustment to the costs order to reflect the successful party's failure is only appropriate if it has acted unreasonably in relation to the points on which it lost. Similarly, the character of the point - for example an unsuccessful claim in fraud – may also weigh in favour of a reduced costs award to the successful party.

Where an issue-based (or, perhaps more accurately in the present context, issue-influenced) costs order is appropriate, a judge should hesitate before making an order by reference to the costs of the specific issue, as opposed to a proportionate reduction in the successful party's costs: see [23].

In those cases in which it is appropriate to depart from the general rule, a further issue arises as to whether the court should stop at depriving the successful party of part of its costs or go further and make the successful party pay part of the costs of the other party (R (Viridor Waste Management Ltd and ors) v Revenue and Customs Commissioners [2016] EWHC 2502 (Admin), [2016] 5 Costs LR 965, [7]). This will only be appropriate in a suitably exceptional case and is to be regarded as far from routine (ibid, [19] and Summit Property Ltd v Pitmans [2001] EWCA Civ 2020, [17]).

While I was referred to no authority on this issue, it is frequently the case that a party raises an alternative case which the Court does not need to decide (and does not decide) because of the way in which other issues are determined. In those circumstances, unless the decision to pursue the alternative argument was unreasonable, the fact that there has been no decision on the merits of the point will not preclude the successful party from recovering those costs.”

Incidence

In relation to the incidence of costs in the AerCap claim, the parties’ positions were as follows. AerCap’s primary position was that it was successful on ‘non-peril’ issues, and was entitled to its costs on those issues against all the Defendants, and that no Defendants were entitled to their costs of those issues from AerCap. AerCap contended that all Defendants should be jointly and severally liable for those costs. AerCap also contended, on the basis of an exercise of which Mr Oddy of Herbert Smith Freehills Kramer gave evidence, that only some 19% of AerCap’s costs were properly to be attributed to ‘peril’ issues, and that 81% were properly to be attributed to non-peril issues. AerCap contended that War Risks Insurers should be jointly and severally liable for its costs of peril issues. It further argued that any costs awarded to HFW AR Insurers and/or Chubb on peril issues should be the subject of a ‘Sanderson’ order (ie an order that the unsuccessful defendant, here the War Risks Insurers, should pay the costs of the successful defendant, here the HFW AR Insurers, directly to the successful defendant), alternatively a ‘Bullock’ order (ie an order that the costs payable by the claimant, here AerCap, to the successful defendant should be recoverable by the claimant from the unsuccessful defendant as part of the claimant’s costs in the proceedings).

For HFW AR Insurers it was submitted that they, having succeeded, should recover all their costs of the action from AerCap, alternatively from War Risks Insurers. They should not be liable for any costs to AerCap, including in relation to ‘non-peril’ issues.

For War Risks Insurers, it was accepted that they should be ordered to pay their ‘fair share’ of AerCap’s ‘non-peril’ costs, which, they contended, amounted to only some 30% of AerCap’s costs. As AerCap had proposed shared joint liability with AR Insurers for the costs of those issues, there should be a 50:50 split of those costs between War Risks Insurers and AR Insurers. As to HFW AR Insurers’ costs, these should be borne by AerCap and there should be no shifting of those costs to War Risks Insurers, either by a Sanderson or a Bullock order.

Chubb contended that any order for costs needed to reflect the facts that AerCap’s claim under the all risks section of the policy had failed, while its much smaller claim against Chubb under the war risks section had succeeded, and that the issue which had occupied the substantial majority of the trial (viz. peril) was one on which Chubb succeeded and AerCap failed. The appropriate order, Chubb contended, was that Chubb should pay 4.8% of 30% of AerCap’s costs, while AerCap should pay Chubb 70% of its costs of the AerCap claim. Chubb should not be ordered to pay any part of HFW AR Insurers’ costs.

What has given rise to the wide differences between these positions is, essentially, that AerCap had alternative claims against different groups of insurers, that its primary case was that all risks insurers were liable and war risks insurers were not, and that much of the trial was occupied by the issue of whether any operative peril was an all risk peril or a war risks peril.

It is necessary to identify the correct starting points. These are, in my view, the following:

That AerCap was the successful party as against War Risks Insurers. It succeeded in obtaining judgment for the sum due under that section of the policy (which amounted to a sum of US$1.2 billion before settlements).

That HFW AR Insurers were the successful party as against AerCap. The claim against them failed in its entirety.

That AerCap was the successful party as against Chubb. It is true that Chubb was found liable only for US$57.6 million, which was its exposure as a war risk insurer, rather than the more than US$195 million it would have been liable for as an all risks insurer, but that does not alter the fact that Chubb had denied that it was liable for any amount, and has been found liable for a significant sum.

Those starting points are to be reflected in a basic costs order that:

AerCap should recover its costs against War Risks Insurers. This is subject to any reduction to account for the fact that part of its costs was attributable to the issue of peril, on which its primary case was aligned with War Risks Insurers.

Subject to any reduction to take account of points on which they did not succeed, HFW AR Insurers should be entitled to their costs against AerCap, unless and to the extent that it is appropriate that they should be borne, either directly or indirectly, by War Risks Insurers. HFW AR Insurers, as successful parties, should not bear any part of AerCap’s costs. The fact that HFW AR Insurers took certain points on which they did not succeed does not, in this case, mean that they were other than the successful party, although it may warrant a reduction in the percentage of costs they can recover.

Chubb should be liable for an appropriate proportion of AerCap’s costs, and should not be entitled to claim costs from AerCap.

I turn to consider the extent to which there should be qualifications of the basic costs orders indicated above, to take account of the parties’ positions in relation to the issues which were in dispute, and the comparative importance of those issues in terms of the preparation and presentation of the case. As to this:

I consider that AerCap’s recovery against War Risks Insurers should be significantly reduced to allow for the fact that in relation to the very important issue of peril, which took up the bulk of the time at trial, AerCap’s primary case was that the loss had been caused by an all risks peril. That that was AerCap’s primary case was not because it was simply passing on a case made by War Risks Insurers; it was because AerCap would recover substantially more if it had been able to demonstrate a loss caused by an all risks rather than a war risks peril. Moreover, AerCap was not neutral on the point, even during its evidence at trial, during which Mr Kelly in particular was keen to advance the case that the loss had been caused by an all risks peril. I reject the notion that it is appropriate to regard only c. 20% of AerCap’s costs as referable to the peril issue. Even if that was the proportion of costs referable solely to the peril issue and not to any other issue, it does not reflect the importance of the issue of peril in the case and at the hearing. Nor does it properly reflect the fact that, though some costs were in theory referable in part to other issues, they in reality related principally to peril. In light of that, but also keeping in mind that AerCap was the successful party and that the court has to be cautious in moving too far from the principle that a successful party should recover its costs, my assessment is that AerCap should recover 65% of its costs from War Risks Insurers.

HFW AR Insurers, in common with War Risks Insurers, relied on a variety of points on which they were unsuccessful. These included points on which they put AerCap to proof including as to whether AerCap had taken reasonable steps to recover the aircraft, sanctions arguments, and the arguments to the effect that there was no cover under AerCap’s contingent coverage. Mr Wales KC submitted that HFW AR Insurers’ costs attributable to such non-peril issues were less than 1%, and certainly not more than 2%. I found this difficult to accept, not least because there was a broad consensus, in which I shared, that the overall time and effort during the trial was split roughly 70% peril / 30% non-peril, and, while some of HFW AR Insurers’ representatives may have absented themselves for part of the non-peril issues, not all did for all of them. In my view, it is appropriate to say that HFW AR Insurers can recover 90% of their costs.

Chubb should, as I have already said, be regarded as an unsuccessful party vis a vis AerCap. Given that, if the non-peril defences failed, it would be liable for a substantial sum whether the loss was caused by a war risks peril or an all risks peril, it should, had it wished to protect itself as to costs, have made a Part 36 or other offer to pay the amount for which it would be liable were the loss the result of a war risks peril. It did not do so; but instead raised its own arguments as to the interpretation of the policy, and as to Russian settlements, which were rejected. I do accept, however, that it is appropriate that there should be a reduction in the proportion of costs which AerCap can recover from Chubb, to reflect the fact that AerCap succeeded against Chubb in a considerably smaller amount than it would have done on its primary case. AerCap’s recovery should, nevertheless, not be reduced by too great a percentage, because it is the case that Chubb’s separate representation at the trial added to the overall costs, did not contribute to the argument as to peril, where all points were made by others, but added issues of construction on which Chubb was unsuccessful. In my view, Chubb should be treated in the same way as War Risks Insurers, and be responsible for its proportion of 65% of AerCap’s costs.