[2025] EWHC 1430 (Comm)

DAE/Falcon pursue a claim for costs and expenses. These are in the amounts of US$4,272,353.56 for DAE and US$7,000 for Falcon.

Mr Lopes gave unchallenged evidence as to the amounts involved. The relevant question is therefore whether there is cover for those amounts.

DAE recovered aircraft MSNs 293, 946 and 37136, and incurred costs in doing so. Specifically

The basis of the claim in respect of the recovered aircraft is as Salvage Charges and Expenses; and/or the costs of ferry flights are recoverable under the Repossession Expenses Endorsements to DAE’s AR and WR Policies.

The Salvage Charges and Expenses Cover at clause 7.2.2 of the AR Cover provides:

The Insurers will pay for:

…

7.2.2

salvage charges and expenses incurred by or on behalf of the Insured for the safety, preservation or recovery of an Aircraft and/or, as applicable, Spares.

Under the same policy, by clause 11.8 the Insured was to ‘use due diligence and concur in doing everything reasonably practicable to avoid or diminish any loss hereon…’.

Those clauses were also incorporated into the DAE WR Policy.

There is a Repossession Expenses Endorsement to both the DAE AR and WR Policies. That in the AR Policy provides:

1 In consideration of the premium charged for this Insurance, the Insurers agree to indemnify the Insured up to a limit of USD1,000,000 in respect of any one Aircraft or Engine and USD2,000,000 in the aggregate in respect of expenses incurred in connection with the repossession or attempted repossession of an Aircraft or Engines in exercise of rights vested in the Insured under the terms of a lease agreement.

2 Expenses shall mean:

a.

The cost of engaging and positioning the statutory minimum flight crew and technical engineers for the purposes of the flight.

b.

The cost of fuel, lubricants and hydraulics necessarily incurred for the purposes of the flight.

c.

All airport dues and air navigation charges incurred during the course of the flight but excluding any fees incurred subsequent to landing at the destination airport.

d.

With respect to Engines, all transportation costs incurred in connection with Engine delivery to the Insured’s base and any applicable import taxes.

3 For the purposes of this Endorsement flight shall mean all flying (including test flying), taxiing, hangarage or parking necessary for the return of the Aircraft from the airport at which repossession takes place, to the airport stipulated in the lease agreement for return of the Aircraft on expiry of the lease (destination airport).

4 This Endorsement only applies to Aircraft or Engines on which a right to repossession is established during the period of this Insurance and which is advised to the Insurers within 30 days of being established.

5 In the event of any payment under this Endorsement, the Insured shall diligently pursue any rights of recovery against the Operator, and any proceeds received will be due to the Insurers, provided always that the Insurers shall not be entitled to benefit in any general recoveries obtained by the Insured unless and until the Insured’s own losses have been made good.

The Endorsement in the DAE WR Policy was in the same terms, save that the limit specified was of US$ 1 million any one aircraft and in the aggregate.

In my judgment the position in relation to the Nordwind aircraft, repossessed in Mexico City, is relatively straightforward. I have no difficulty in accepting that the expenses of this operation were for the purposes of avoiding or diminishing a loss under the WR Cover, and were for the ‘preservation’ of the aircraft from a WR Peril. Had the aircraft been flown back to Russia, as it was scheduled to do, it would have been caught by the Russian measures, including in particular GR 311. Accordingly, and subject to the point I make below as to post-ferry flight expenses, the expenses referable to it are payable as Salvage Charges and Expenses under the WR Cover.

I have reached the same conclusion, albeit with more hesitation, in relation to the two I-Fly aircraft. They were not subject to, or in the grip of a WR Peril, being outside Russia. However, that does not appear to me to be the relevant test: the question is whether the expenditure was to avoid the aircraft being lost by a WR Peril. While there is no direct evidence that I-Fly was intending to fly the aircraft back to Russia, or that the repossession efforts were undertaken to prevent its doing so, Mr Lopes does give evidence that his impression is that ‘I-Fly would not respond to any proposition that might go against the position in Russia that they were not allowed to return airplanes to lessors.’ Accordingly, I consider that it can be inferred that I-Fly would have returned the aircraft to Russia, and complied with the ban on export, had it been able to do so. The expenses of repossession avoided that loss. Thus, again, and subject to the post-ferry flight point below, I consider that the relevant expenses were payable as Salvage Charges and Expenses under the WR Cover.

Had I not found that all the claimed expenses were payable as Salvage Charges and Expenses, I would have found that at least the costs of the ferry flights were recoverable as Repossession Expenses under the WR Cover, up to an amount of US$ 1 million.

In relation to all the recovered aircraft, I considered that WR Insurers made a fair point that expenses incurred after the completion of the ferry flight in each case were not covered. It has not been established that those expenses were for the purposes of avoiding or diminishing a loss under the WR Cover. There is, in relation to such amounts a dearth of relevant evidence. Accordingly I conclude that DAE has not established its entitlement to claim those amounts. If any issue arises as to their quantification, it will need to be resolved with the other, limited, issues as to quantum which I am not going to decide now.

DAE also make a claim for expenses in relation to unrecovered aircraft. These were expenses for inspectors and consultants, including for technical representatives in Russia who attempted to access and scan aircraft records and to carry out physical inspection of the aircraft. The amounts claimed are US$130,718.35 for DAE and US$7000 for Falcon.

These are claimed primarily as Salvage Charges and Expenses. WR Insurers accepted that liability for these expenses would follow my findings in relation to whether the relevant aircraft were lost by a WR or an AR Peril. As I have found that they were lost by a WR Peril, it follows that WR Insurers are responsible for these costs.