CSDS Aircraft Sales & Leasing Inc v Singapore Airlines Limited

• Jurisdiction: Singapore
• Judge: Steven Chong JCA
• Judgment Date: 19 June 2023
• Neutral Citation: [2023] SGCA(I) 5
• Court: Court of Appeal (Singapore)
• Docket Number: Civil Appeal No 8 of 2022
• Hearing Date: 05 May 2023
• Citation: [2023] SGCA(I) 5
• Year: 2023
• Plaintiff Counsel: Shobna Chandran, Yong Manling Jasmine, Thaddaeus Aaron Tan and Marissa Daisy Decruz (Tan Rajah & Cheah)
• Defendant Counsel: Tan Teck San Kelvin, Yip Ting Yuan Darren and Kenneth Kwek Junjie (Drew & Napier LLC)
• Subject Matter: Damages,Assessment,Valuation of aircraft,Evidence,Weight of evidence,Expert opinion evidence
• Published date: 22 June 2023

Steven Chong JCA (delivering the grounds of decision of the court): Introduction

This appeal, CA/CAS 8/2022 (“CAS 8”), concerns an award of damages by an International Judge (the “Judge”) of the Singapore International Commercial Court (the “SICC”) in Singapore Airlines Ltd v CSDS Aircraft Sales & Leasing Inc [2022] SGHC(I) 15 (the “Judgment”), following an assessment of damages hearing. The facts of the underlying suit are unremarkable.

The appellant, CSDS Aircraft Sales & Leasing Inc (“CSDS”) entered into a contract dated 19 September 2018 (the “Agreement”) to purchase from the respondent, Singapore Airlines Ltd (“SIA”), a Boeing 777-212 aircraft (the “Aircraft”) without engines at the price of US$6.5m. CSDS paid the deposit of US$250,000, but failed to make payment of the balance sum of US$6.25m. Following the trial on liability (as reported in Singapore Airlines Ltd v CSDS Aircraft Sales & Leasing Inc [2021] 5 SLR 26), the SICC found that CSDS was in repudiatory breach of contract and this breach was accepted by SIA as bringing the contract to an end on 4 November 2018 (this finding was upheld on appeal in CSDS Aircraft Sales & Leasing Inc v Singapore Airlines Ltd [2022] 1 SLR 284). Thereafter, the outstanding issue was the assessment of damages for losses consequent upon the breach.

It was common ground between the parties that the measure of damages for the repudiatory breach would be the difference between the contract price and the market value of the Aircraft under s 50(3) of the English Sale of Goods Act 1979 (c 54) (UK) (the “SGA 1979”). The key issue before the Judge, and also before us on appeal, pertained to the proper determination of the market value of the Aircraft. The Judge relied on both the factual and expert evidence on record to arrive at the market valuation of the Aircraft at US$1.5m (Judgment at [52]).

The crux of CSDS’ case was that the Judge had erred when he entirely disregarded the expert evidence to arrive at his own valuation. As we will explain below, this submission was wrong both factually and as a matter of legal principle. Contrary to CSDS’ submission, the Judge did in fact take into account the expert evidence. Further, the assessment of the available evidence does not require the court to undertake a binary exercise in preferring one category of evidence over the other. The weight to be ascribed to any expert evidence is typically fact-sensitive and must necessarily take into account the factual matrix before the court. The court’s task is to assess all the evidence holistically, both factual and expert evidence, and to ascribe the appropriate weight depending on the issue, the nature and inherent reliability of the evidence. These principles assume central importance in this appeal.

We heard and dismissed CAS 8 on 5 May 2023 with brief grounds. In these detailed grounds, we will expound on the role of the court in evaluating the interaction between factual and expert evidence in relation to the same issue concerning valuation, and how they each play a useful role in providing a reality check on the probative weight of the evidence.

The background The factual evidence underlying the dispute

By way of background, SIA is a Singapore company that carries on the business of an international carrier by air, whilst CSDS is a US company carrying on the business of aircraft sales and leasing. Following the finding that CSDS was in repudiatory breach of the Agreement, SIA claimed the following heads of damages: the difference in the contract price and the market value of the Aircraft, under s 50(3) of the SGA 1979, which would, it was submitted, allow for a reasonable time for negotiation and conclusion of a substitute sale following acceptance of the repudiation; parking and maintenance fees from 4 November 2018 until the expiry of that reasonable time; and marketing, brokerage and legal costs.

Despite various efforts by SIA to resell the Aircraft without engines after 4 November 2018, no successful substitute sale was concluded. These were attempted by way of issuing Requests for Proposals (“RFP”) on 20 November 2018, 12 March 2019 and May 2019. The RFPs provided the general specifications, incident history and maintenance status of the Aircraft to prospective purchasers. There were also attempts to sell the component parts of the Aircraft in circumstances where the Aircraft could not fly without passing various tests and obtaining certifications at some expense.

The November 2018 RFP and the revised bid

On 29 November 2018, SIA issued an RFP for the sale of the Aircraft without engines by placing a public advertisement on “Aeroconnect” (a web-based aviation marketplace with over 9,000 key commercial contacts), and by sending an RFP to its usual list of 200 or so prospective purchasers (the “November 2018 RFP”). Under the November 2018 RFP, buyers had the option of either (a) ferrying the Aircraft out of Singapore with its own engines, or (b) dismantling the airframe and harvesting the aircraft components.

On the evidence of SIA’s senior manager responsible for aircraft sales, the highest bid received pursuant to the November 2018 RFP was US$2.1m. However, the party who submitted the bid subsequently informed SIA that it would have to reduce and/or withdraw its bid. This was due to difficulties which made the sale of the Aircraft or its components uneconomic. To elaborate on these difficulties: By 10 November 2018, even though the Certificate of Airworthiness for the Aircraft continued to be valid, the Aircraft was not allowed to be ferried to another destination while the Aircraft remained under Singapore registration, unless the Aircraft underwent a series of extensive and expensive maintenance checks (which had expired). As the sale was to be without engines, in order to remove the Aircraft, a purchaser would have to bring in its own engines, utilise its own crew, and then change the registration of the Aircraft. Alternatively, a buyer seeking to harvest the Aircraft for its components would have to dismantle the Aircraft in Singapore and dispose of the airframe after doing so (which would also involve significant costs). Additionally, the Changi Airport Group (“CAG”) did not permit disposal of the airframe at the “airside” at Singapore Changi Airport.

Given the circumstances, SIA had to explore alternatives. As it happened, CAG had expressed an interest in taking the Aircraft’s airframe for training purposes (on the condition that the landing gear, windows and doors remained intact), in exchange for assisting to dismantle and dispose of the airframe at no cost. This would allow other purchasers to harvest the remaining parts. SIA considered CAG’s proposal as being worthwhile to explore. In the circumstances, SIA requested the top three bidders who previously responded to the November 2018 RFP to offer a revised bid for the Aircraft components, without the airframe, landing gear, windows and doors. The highest bid for the revised inventory components only amounted to US$600,000, which SIA decided not to pursue as it was inadequate.

The March 2019 RFP

A further RFP was then issued on 12 March 2019 based on components to be harvested in two phases in 2019 (the “March 2019 RFP”). Under the March 2019 RFP, a prospective purchaser may harvest a selected list of components, with an option of bidding for the landing gear, but leaving the airframe intact for CAG. SIA sent this RFP to the usual list of prospective purchasers, comprising some 200 parties. SIA eventually received three bids, and the highest bid was US$1.315m for the components without the airframe.

However, SIA did not proceed with this bid as it considered redeploying the Aircraft to meet the operational needs of its sister airlines, SilkAir or Scoot. But if extensions to leases on the other aircrafts could be negotiated for SilkAir or Scoot, then the redeployment of the Aircraft would not be needed – as in fact ultimately proved to be the case.

Around May 2019, whilst preserving options, SIA placed public advertisements on “Aeroconnect” and “Airfax” (a publication on the worldwide availability of commercial transport aircraft) for the sale of the Aircraft. While SIA received a few enquiries, no firm offer was made.

Other attempts from August 2019 to October 2020

By August 2019, SIA decided not to proceed with the deployment of the Aircraft to its sister airlines. SIA then recontacted the highest bidder for the March 2019 RFP (at US$1.315m) to enquire if it was still interested in pursuing its previous bid. However, the bidder was no longer keen and did not make an offer.

Up until October 2019, SIA continued to place public advertisements on “Aeroconnect” and “Airfax”, and advertised the Aircraft for sale at aviation trade fairs in Singapore. SIA also engaged with a number of different parties in attempts to sell the Aircraft, but all without success.

Between November 2019 and May 2020, as SIA was in settlement discussions with CSDS that involved the delivery of the Aircraft, SIA did not take steps to sell or advertise the Aircraft in this period whilst it was in active discussions. As it transpired, SIA and CSDS were not eventually able to reach a settlement.

Finally, by October 2020, after the discussions with CSDS had come to an end and it appeared that there was no longer any market for the Aircraft (COVID-19 had severely impacted the market by then), SIA decided to part out the Aircraft. Having outlined the factual evidence on record, we turn next to examine the expert evidence.

The expert evidence on the market value of the Aircraft

SIA adduced expert evidence from Mr Philip Seymour (“Mr Seymour”), a senior certified aircraft appraiser. Although CSDS attempted to present opposing evidence from its own expert, the expert was eventually not tendered for cross-examination and no reliance could be placed on that expert’s...