Singapore Airlines Ltd v CSDS Aircraft Sales & Leasing Inc

• Jurisdiction: Singapore
• Judge: Jeremy Lionel Cooke IJ
• Judgment Date: 03 November 2022
• Neutral Citation: [2022] SGHC(I) 15
• Court: International Commercial Court (Singapore)
• Docket Number: Suit No 4 of 2019 (Assessment of Damages 1 of 2022)
• Published date: 09 November 2022
• Year: 2022
• Hearing Date: 10 October 2022,11 October 2022
• Plaintiff Counsel: Tan Teck San Kelvin, Choy Wai Kit Victor and Yip Ting Yuan Darren (Drew & Napier LLC)
• Defendant Counsel: Shobna Chandran, Thaddaeus Aaron Tan Yong Zhong and Yong Manling Jasmine (Tan Rajah & Cheah)
• Subject Matter: Damages,Assessment
• Citation: [2022] SGHC(I) 15

Jeremy Lionel Cooke IJ: Introduction

This is the assessment of damages following the trial on liability in this matter, which is reported as Singapore Airlines Ltd v CSDS Aircraft Sales & Leasing Inc [2021] 5 SLR 26. In that judgement, I held that the defendant was in repudiatory breach of contract on 26 October 2018 and that this breach was accepted by the plaintiff as bringing the contract to an end on 4 November 2018. That judgement was upheld by the Court of Appeal, the decision being reported at CSDS Aircraft Sales & Leasing Inc v Singapore Airlines Ltd [2022] 1 SLR 284. The contract in question was an aircraft purchase agreement dated 19 September 2018 (“the Aircraft Purchase Agreement”) under which the plaintiff agreed to sell, and the defendant agreed to purchase a Boeing 777-212 aircraft (“the Aircraft”) without engines for the sum of US$6,500,000. The defendant paid the deposit of US$250,000 but failed to make payment of the balance of US$6,250,000.

The plaintiff claims the following heads of damages: The difference in the contract price and the market price of the Aircraft, under s 50(3) of the English Sale of Goods Act 1979 (c 54) (UK) (“the Act”) which would, it was submitted, allow for reasonable time for negotiation and conclusion of the 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 associated with any such sale.

No such sale of the Aircraft (without engines) in fact took place, despite various efforts on the part of the plaintiff to sell it by issuing Requests for Proposals (“RFPs”) on 20 November 2018, 12 March 2019 and in May 2019, and despite attempts to sell its component parts in circumstances where the Aircraft could not fly without passing various tests and obtaining certification which would have cost significant sums of money. Such components would have to be harvested in Singapore, whilst the Changi Airport Group (“the CAG”) would not allow the airframe of the Aircraft (“the Airframe”) to be disposed of “airside” in Changi Airport. On the evidence of Mr Cheong Khin Cheong (“Mr Cheong”), the plaintiff’s Senior Manager responsible for aircraft sales, the highest bid for the Aircraft that the plaintiff received pursuant to the November 2018 RFP was US$2.1m but this was subsequently reduced or withdrawn for because of the difficulties referred to above which made anything other than a sale of the component parts uneconomic and the Airframe more of a liability than an asset. Because the CAG expressed an interest in taking the Airframe for training, in exchange for dismantling and disposing of the Airframe at no cost after it had been used, on the condition that the landing gear, windows and doors remained intact for their use in the interim, the plaintiff requested the top three bidders responding to the November 2018 RFP to offer a revised bid for the components of the Aircraft without the Airframe, landing gear, windows and doors. The highest bid received for these components was US$600,000 which the plaintiff considered inadequate, particularly when taking account of the cost to the plaintiff in assisting with the removal of parts. A further RFP was then issued on 12 March 2019 based on components to be harvested in two phases in 2019. A purchaser could bid for a selected list of components with an option to bid for the landing gear, with the Airframe left intact for CAG. The highest of three bids received was US$1.315 million. However, due to the grounding of all Boeing 737 Max aircraft in Singapore by the Civil Aviation Authority of Singapore (“CAAS”) on 12 March 2019, the plaintiff decided not to proceed with negotiations with bidders as it was considering redeploying the Aircraft to meet the operational needs of its sister airlines, SilkAir or Scoot. In May 2019, whilst considering whether to redeploy the Aircraft, the plaintiff placed public advertisements for the sale of the Aircraft with the delivery date to be decided, but anticipated to be in 2020, in order to investigate all options. No offers were received. In August 2019, the plaintiff decided not to proceed with the deployment of the Aircraft to SilkAir and then engaged further with a number of different parties in attempts to sell the Aircraft, all without success. From November 2019 onwards, without prejudice negotiations took place with the defendant with a view to achieving a settlement of the dispute between them but the parties were unable to reach any agreement. By October 2020, the plaintiff decided, on concluding that there was no longer any market for the sale of the Aircraft as such, to part out the Aircraft as the only economic course to be adopted. The Aircraft was parted out in October 2021.

Since both parties agreed that there was an available market, once the plaintiff’s expert had submitted his report in which he gave his opinion that there was an available market on 4 November 2018 when the plaintiff terminated the contract in consequence of the defendant’s repudiatory breach, that factual history might be thought to be largely irrelevant to the dispute between the parties as to the proper measure of damages. It is however, in fact significant in any assessment of the market price of the Aircraft. The best available evidence of the market price, assuming proper marketing, is what actually happened when attempts were made to sell the Aircraft. If a sale had resulted from the plaintiff’s efforts, it would (again assuming proper diligence in the sales process) likely establish market value. No such sale did occur, and the parts were sold or utilised well after any relevant period for assessing the market price of the Aircraft. Nonetheless, offers made will give some indication of likely market value as long as the circumstances are taken into account.

It was common ground between the parties that the measure of damages was to be assessed by reference to s 50(3) of the Act, but there was a difference between them as to what that meant in terms of the date to which the court should have regard. Section 50(3) of the Act provides:

Where there is an available market for the goods in question the measure of damages is prima facie to be ascertained by the difference between the contract price and the market or current price at the time or times when the goods or to have been accepted or (if no time was fixed for acceptance) at the time of the refusal to accept.

The plaintiff, relying upon a decision of Gross J (as he then was) in AerCap Partners I Ltd v Avia Asset Management AB [2010] EWHC 2431 (Comm) (“AerCap”), at [109] in particular, and a passage in The Golden Victory [2007] 2 AC 353 (“The Golden Victory”) at [34], submitted that a seller was entitled to a reasonable time to enter into a substitute sale and that the relevant market price for the purpose of assessing the quantum of recoverable loss was the market price at the expiration of that period. The opinion of the plaintiff’s expert was that a period of nine to twelve months constituted such a reasonable period because of the weakness in demand for aircraft of the relevant type in the period following November 2018. The market for used aircraft was not spontaneous and time was required to find a suitable buyer, to obtain offers and negotiate a sale even in a balanced market, but the market at that time was soft.

In the interim period before the Aircraft was parted out, the plaintiff incurred maintenance and parking charges for the Aircraft, which it submitted it was entitled to recover as damages up to the expiry of the reasonable time that it was allowed for the conclusion of a sale. It relied upon the actual figures it had incurred for that period. Additionally, however, the plaintiff sought to recover what were submitted to be standard marketing, brokerage and legal costs on a substitute sale, though such had not actually been incurred.

The defendant’s case was that the only relevant date for assessment of damages was the date of termination of the contract, namely 4 November 2018 and that, at that stage, the actual value of the Aircraft exceeded the contract value. Alternatively, if the plaintiff was right in saying that the market value should be calculated at a date following a reasonable period in which a substitute sale could be achieved, that period was less than three months. Once again it was said that the actual value of the Aircraft exceeded the contract price at that date. It was also submitted that the parking charges, the maintenance charges, the marketing, brokerage and legal costs were all irrecoverable or alternatively, if recoverable, were unjustified and manifestly excessive.

There was no plea by the defendant of any failure to mitigate, which might again be thought to be of limited importance because the basis of the case advanced by the plaintiff was based on market value, but because what actually happened is evidence of the market value and the reasonable expense incurred to realise it, it was open to the defendant to say that the plaintiff had not made adequate efforts to sell the Aircraft and had incurred unnecessary or unrelated expenditure in the course of such efforts that it did make.

The relevant principles of English law

The essential principle for which the plaintiff contends, namely that s 50(3) of the Act allows a seller a reasonable period of time to make the substitute sale or establish the market price for the purpose of assessing the quantum of the recoverable loss, is made good by the authorities to which it refers. No purpose would be served by citing [103]–[117] of the judgement of Gross J (as he then was) in AerCap, but he rejected the proposition which is advanced by the defendant in this case. He recorded that it was most unattractive to insist that the damages were limited by reference to a notional...