Kuwait Airways Corp v Iraqi Airways Co

The tort of conversion is the principal means whereby English law protects the ownership of goods.

In general, the basic features of the tort of conversion of goods are threefold: - (1) the defendant's conduct was inconsistent with the rights of the owner (or other person entitled to possess); (2) the conduct was deliberate, not accidental; and (3) the conduct was so extensive an encroachment on the rights of the owner as to exclude him from use and possession of the goods. (Lord Nicholls in KAC v IAC (Nos 4 and 5) at paragraph 39).

The Torts (Interference with Goods) Act 1977 provides that in proceedings for wrongful interference against a person who is in possession or in control of the goods relief may be given in accordance with section 3 so far as appropriate. (Section 3(1)).

The relief is: -

The tort of conversion gives rise to an obligation to pay damages. Payment of damages may have proprietary consequences. Payment of damages assessed on the footing that the claimant is being compensated for the whole of his interest in the goods extinguishes his title: see section 5 of the Torts (Interference with Goods) Act 1977. Further, when the defendant is in possession of the claimant's goods the remedies available to the claimant include a court order that the goods be delivered up: see section 3.  

The fundamental object of an award of damages in respect of conversion, as with all wrongs, is to award just compensation for loss suffered.

Damages in tort are awarded by way of monetary compensation for a loss or losses which a claimant has actually sustained. The aim of the law, in respect of the wrongful interference with goods, is to provide a just remedy. Despite its proprietary base, this tort does not stand apart and command awards of damages measured by some special and artificial standard of its own. Normally the measure of damages is the market value of the goods at the time the defendant converted them. This is the general rule, because generally this measure represents the amount of the basic loss suffered by the claimant owner. He has been dispossessed of his goods by the defendant. Depending on the circumstances some other measure, yielding a higher or lower amount, may be appropriate. The claimant may have suffered additional damage consequential on the loss of his goods. Or the goods may have been returned. (Lord Nicholls in KAC v IAC (Nos 4 and 5) at paragraphs 66 and 67).

The extent of a defendant's liability for the claimant's loss calls for a twofold inquiry: (1) whether the wrongful conduct causally contributed to the loss and (2) if it did, what is the extent of the loss for which the defendant ought to be held liable? (Lord Nicholls in KAC v IAC (Nos 4 and 5) at paragraph 69).

(1) Whether the wrongful conduct causally contributed to the loss?

This guideline principle is concerned to identify and exclude losses lacking a causal connection with the wrongful conduct. Expressed in its simplest form, the principle poses the question whether the claimant would have suffered the loss without ('but for') the defendant's wrongdoing. If he would not, the wrongful conduct was a cause of the loss. If the loss would have arisen even without the defendant's wrongdoing, normally it does not give rise to legal liability. Even if the claimant's loss passes this exclusionary threshold test, it by no means follows that the defendant should be legally responsible for the loss.

The threshold 'but for' test is based on the presence or absence of one particular type of causal connection: whether the wrongful conduct was a necessary condition of the occurrence of the harm or loss. In very many cases this test operates satisfactorily, but it is not always a reliable guide. Torts cover a wide field and may be committed in an infinite variety of situations. Even the sophisticated variants of the 'but for' test cannot be expected to set out a formula whose mechanical application will provide infallible threshold guidance on causal connection for every tort in every circumstance. In particular, the 'but for' test can be over-exclusionary.

Every person through whose hands goods pass in a series of conversions is himself guilty of conversion and liable to the owner for the loss caused by his misappropriation of the owner’s goods. His liability is not diminished by reason of his having acquired the goods from a thief as distinct from the owner himself. In cases of successive conversion, if the ‘but for’ test is to be applied at all, the answer lies in keeping in mind that each person in a series of conversions wrongfully excludes the owner from possession of his goods. The exclusionary threshold test is to be applied on this footing. The test calls for a comparison between the owner's position had he retained his goods and his position having been deprived of his goods by the defendant. Loss which the owner would have suffered even if he had retained the goods is not loss 'caused' by the conversion.

(2) If the wrongful conduct causally contributed to the loss, what is the extent of the loss for which the defendant ought to be held liable?

The second stage of the twofold inquiry involves a value judgment and concerns the extent of the loss for which the defendant ought fairly or reasonably or justly to be held liable. The inquiry is whether the claimant's harm or loss should be within the scope of the defendant's liability, given the reasons why the law has recognised the cause of action in question. The law has to set a limit to the causally connected losses for which a defendant is to be held responsible. Losses outside the limit may bear one of several labels. They may be too remote because the wrongful conduct was not a substantial or proximate cause, or because the loss was the product of an intervening cause. The defendant's responsibility may be excluded because the claimant failed to mitigate his loss. Familiar principles, such as foreseeability, assist in promoting some consistency of general approach. These are guidelines, some more helpful than others, but they are never more than this. (Lord Nicholls in KAC v IAC (Nos 4 and 5) at paragraph 70).

Vindication of a claimant's proprietary interests requires that, in general, all those who convert his goods should be accountable for benefits they receive. They must make restitution to the extent they are unjustly enriched. The goods are the claimant’s, and he is entitled to reclaim them and any benefits others have derived from them. Liability in this regard should be strict subject to defences available to restitutionary claims, such as change of position. Additionally, those who act dishonestly should be liable to make good any losses caused by their wrongful conduct.

The fundamental object of an award of damages for conversion is to award just compensation for loss suffered. When the goods or their equivalent are returned, the owner sometimes suffers no financial loss. But the wrongdoer may well have benefited from his temporary use of the owner's goods. It would not be right that he should be able to keep this benefit. The court may order him to pay damages assessed by reference to the value of the benefit he derived from his wrongdoing. In an appropriate case the court may award damages on this 'user principle' in addition to compensation for loss suffered. For instance, if the goods are returned damaged, the court may award damages assessed by reference to the benefit obtained by the wrongdoer as well as the cost of repair.

Recognition that damages may be awarded on this principle may assist in making some awards of damages in conversion cases more coherent. This is the preferable basis for the award of damages in Solloway v McLaughlin [1938] AC 247 and BBMB Finance (Hong Kong) Ltd v Eda Holdings Ltd [1990] 1 WLR 409.

The common law has long recognised that there are many situations where a strict application of the principle that damages are measured by the claimant’s loss, not the defendant’s gain would not do justice between the parties. Then compensation for the wrong done to the claimant is measured by a different yardstick. A trespasser who enters another's land may cause the landowner no financial loss. In such a case damages are measured by the benefit received by the trespasser, namely, by his use of the land.

In Strand Electric and Engineering Co Ltd v Brisford Entertainments Ltd [1952] 2 QB 246 the claimant’s equipment which the defendant detained (portable switchboards) was profit-earning property. The claimant normally hired out the equipment in the course of its business. The defendant during the period of wrongful detention applied the property to the furtherance of its own ends. The claimant was held to be entitled to a sum representing the reasonable hire of the goods for the period of detention.

The Earl of Halsbury LC asked in The Mediana [1900] AC 113, 117, if a person took away a chair from his room and kept it for 12 months, could anybody say you had a right to diminish the damages by showing that I did not usually sit in that chair, or that there were plenty of other chairs in the room?

In Watson, Laidlaw & Co Ltd v Pott, Cassels and Williamson (1914) 31 RPC 104, 119 Lord Shaw said: -

“Wherever an abstraction or invasion of property has occurred, then, unless such abstraction or invasion were to be sanctioned by law, the law ought to yield a recompense under the category or principle ... either of price or of hire …

If A, being a liveryman, keeps his horse standing idle in the stable, and B, against his wish or without his knowledge, rides or drives it out, it is no answer to A for B to say: 'Against what loss do you want to be restored? I restore the horse. There is no loss. The horse is none the worse; it is the better for the exercise.”

Awards of user damages cannot be regarded as conforming to the strictly compensatory measure of damage for the injured person’s loss, unless loss is given a strained and artificial meaning. The injured person’s rights were invaded but, in financial terms, he suffered no loss. Nevertheless the common law has found a means to award him a sensibly calculated amount of money. Such awards are probably best regarded as an exception to the general rule.

The common law affords a claimant whose goods are wrongfully converted a choice of two remedies against the wrongdoer. He can recover damages, in respect of the loss he has sustained by the conversion. Or he can recover the proceeds of the conversion obtained by the defendant: see United Australia Ltd v Barclays Bank Ltd [1941] AC 1, 34, per Lord Romer. Historically, the latter alternative was achieved by recourse to an element of legal fiction, whereby the innocent party "waived the tort". The innocent party could suppose that the wrongful sale had been made with his consent and bring an action for money "had and received to his use": see Lamine v Dorrell (1705) 2 Ld Raym 1216, 1217.

A person who misappropriates another's goods does so at his own risk. That is the nature of the wrong. He takes upon himself the risk of being unable to return the goods to their rightful owner. It matters not that he may be prevented from returning the goods due to unforeseen circumstances beyond his control. The reason for his non-return of the goods, or his delay in returning the goods, is neither here nor there so far as his liability to the owner is concerned. If the goods are eventually returned, thereby diminishing the financial loss suffered by the owner, this must be taken into account. But the wrongdoer's liability extends to compensating the owner for the loss he sustains by virtue of his temporary loss of his goods, regardless of the impact any unforeseen circumstances may have had on the wrongdoer. The loss flowing from the unforeseen circumstances should be borne by the wrongdoer, not the innocent owner of the goods. Additionally, provided the amount is not out of proportion to the value of the goods, the wrongdoer ought to reimburse the owner for any money spent on recovering the goods or carrying out necessary repairs. (Lord Nicholls in KAC v IAC (Nos 4 and 5) at paragraph 92).

As to liability for consequential loss (i.e. loss beyond that represented by the value of the goods) in cases of conversion the choice is between confining liability for consequential loss to damage which is 'foreseeable', as distinct from damage flowing 'directly and naturally' from the wrongful conduct. In practice, these two tests usually yield the same result. Where they do not, the foreseeability test is likely to be the more restrictive.

For those who act in good faith, liability remains strict, but liability for consequential loss is confined to types of damage which can be expected to arise from the wrongful conduct. Foreseeability, as the more restrictive test, is appropriate in the case of a person who can prove he acted in the genuine belief the goods were his. (See section 4 of the Limitation Act 1980).

Persons who knowingly convert another's goods act dishonestly. The remoteness test of 'directly and naturally' applied in cases of deceit, applies in cases of conversion where the defendant acted dishonestly. (Lord Nicholls in KAC v IAC (Nos 4 and 5) at paragraphs 99 - 104).

Assessment of the market value of the goods at the time the defendant converted them.

In KAC v IAC (Nos 4 and 5) [2001] 3 WLR 1117 at 1277 to 1280 the Court of Appeal held that if IAC had been liable for the conversion of the Mosul Four, then the correct basis for beginning to value their loss to KAC would have been current market price as defined at p 1277 paragraph 599; -

“Current market price. Current market price (‘CMP’) is MBA’s opinion of the most likely transaction price that may be generated for an aircraft under prevailing market conditions that are perceived to exist at the relevant time. The experts agree that the CMP could reflect the cost that would need to be incurred/paid to replace the aircraft for a ‘like for like’ aircraft if available. CMP also reflects the most likely realisable cash amount in the event that the aircraft was to be sold at a specific date. MBA assigns a market adjustment factor (‘MAF’) to convert the base value (‘BV’) or what is termed by many as the fair market value (‘FMV’) to a current market price. When the market is in a reasonable state of equilibrium, this factor is usually 100%. If the market favours the seller, the factor will be greater than 100%; if the market favours the buyer, the factor will be less than 100%. The product of the BV or FMV and the MAF produces a ‘price’ at which the aircraft is likely to be traded in the market reflecting the criteria detailed above. MBA call this price the current market price. The MAF may indicate that the CMP is in excess of, or below the FMV.”

At paragraph 645 the Court said: -

“The primary consequence of the loss of the Mosul Four was the need to replace them, measured by their value to KAC, of which the foremost component would be the market cost of equivalent substitutes, if available. They were available, and would have been operational within a period of, if not necessarily six to nine months as IAC asserts, at any rate something of that order. It was the cost of such used replacements that was KAC’s primary claim.”

If there is a market price, the value of the goods is to be taken as the market price at the relevant time. If not, the value of the goods must be determined by any available evidence, such as the price at which the goods have been bought, or sold under a sub-contract. Where the claimant himself had contemplated selling the goods, the defendant will generally be given credit for the cost of the putative sale, as that would have been incurred anyway. In a suitable case replacement cost may be some guide as to value.

The general rule is that where goods have been irreversibly converted their value is assessed at the date of conversion. However, that even where goods are articles of ordinary commerce the damages may be assessed by reference to the cost of replacement goods if the cost has increased between the date of conversion and the date when the claimant, acting reasonably, ought to have obtained the replacement.

It is for the defendant who seeks a deduction from expenditure in mitigation on the ground of betterment to make out his case for doing so. It is not enough that an element of betterment can be identified. It has to be shown that the claimant had a choice, and that he would have been able to mitigate his loss at less cost. The wrongdoer is not entitled to demand of the injured party that he incur a loss, bear a burden or make unreasonable sacrifices in the mitigation of his damages. He is entitled to demand that, where there are choices to be made, the least expensive route which will achieve mitigation must be selected. So if the evidence shows that the claimant had a choice, and that the route to mitigation which he chose was more costly than an alternative that was open to him, then a case will have been made out for a deduction. But if it shows that the claimant had no other choice available to him, the betterment must be seen as incidental to the step which he was entitled to take in the mitigation of his loss, and there will be no ground for it to be deducted.

1. Are there grounds for concluding that KAC’s remaindered and recovered data is materially inaccurate or unreliable and, if so, to what extent?

IAC do not allege that there was any deliberate under-recording by KAC. The opening submissions for IAC contended that the CCC testing showed a minimum under-recording of controlled spares of 15 - 16% overall and of 65 - 83% on the part numbers where under-recording was still apparent and that the Maxi-Merlin testing showed, in Mr Villa’s view, an under-recording of rotables of between 14% and 64%.

In the course of the trial IAC abandoned reliance on Mr Villa’s views in connection with the Maxi-Merlin testing.

IAC’s case is that KAC has under-stated in the Working Schedule the number of remaindered and recovered spares which it took back into its operational stock. The evidence, particularly the component control card test, shows that some remaindered and recovered spares were taken back into operational stock by KAC without being recorded as remaindered and recovered. As to the remaindered data and the recovered data, IAC listed a number of factors which whilst “not in themselves providing strong evidence of under-recording … give no reason to doubt the evidence of under-recording from the CCC test”. The two vital factors in assessing the CCC test are (i) that the instances of under-recording have far more significance than those of over-recording and (ii) the incompleteness of the cards is a one-way effect which operates against IAC. Netting off is the heart of the difference between the parties. IAC and Mr Villa say that it is wrong to give equal weight to the cases of under and (apparent) over-recording. IAC submit that the court should adopt the figure of $4 million as a prudent and conservative quantification of the element of under-recording of remaindered and recovered spares in the Working Schedule. This result is fully compatible with the factual evidence and with the extraneous factors identified in the list of 17 factors introduced by KAC.

Mr Campbell’s conclusion that there may be some remaindered items not recorded but, overall, they make no material difference to the remaindered and recovered data, should be accepted. Mr Villa lacked the necessary expertise to evaluate the results of the CCC test. Mr Villa failed to analyse the results of the CCC test in any proper or appropriate manner for a number of reasons, including his refusal to set off the over-recordings shown up by the CCC test. There were 17 balancing factors which led Mr Campbell to say at the end of his evidence that, properly evaluated, the CCC test did not lead to the conclusion that there should be any adjustment to KAC’s data for remaindered and recovered spares. Mr Villa’s credibility was severely damaged by his approach to the Maxi-Merlin testing. IAC’s abandonment of Mr Villa’s third and fourth reports on Maxi-Merlin, demonstrated that Mr Campbell had completely destroyed the analysis that Mr Villa put forward. Mr Villa finally stood by his analysis of the Maxi-Merlin ‘ex-stores’ file, as showing some 37% under-recording for remaindered and some 8.5% under-recording for recovered spares. The analysis was meaningless, once Mr Villa accepted that he did not know whether any particular part in the ‘ex-stores’ file was shown as remaindered or recovered under another part number in the Working Schedule and the MSCS data. There are no grounds for concluding that KAC’s remaindered and recovered data is materially inaccurate or unreliable.

The recording systems at KAC in relation to remaindered and recovered spares were as follows.

Remaindered spares were documented in the following records: -

The 2 files in the LAN system in respect of remaindered spares were entered by Mr Bosco d’Mello’s team: -

Mr Campbell was sent: -

Recovered spares were documented in the following records: -

The 2 files in the LAN system in respect of recovered spares were entered by Mr Bosco d’Mello’s team: -

Mr Campbell was sent the LAN data as to recovered serviceable and unserviceable spares in March 1993.

I turn to consider Issue 1. Any analysis of this issue (are there grounds for concluding that KAC’s remaindered and recovered data is materially inaccurate or unreliable and, if so, to what extent?) should have regard to all relevant evidence, including the unchallenged witness statements, the evidence of the witnesses called by KAC, the relevant documents and the evidence properly regarded as expert evidence.

I refer back to my analysis of the unchallenged witness statements and my assessment of the witnesses called to give evidence by KAC. It is also necessary to bear in mind the findings as to the conduct of IAC post invasion (including IAC’s conduct in relation to this litigation).

IAC abandoned reliance on Mr Villa’s views in connection with the Maxi-Merlin testing. Mr Villa lacked the necessary expertise in relation to accounting practice and related matters – “ I am not a current accountant in professional practice … I do not know what the current accounting practice or auditing practice is on testing …”. Mr Villa did not, when providing reports and giving evidence, state when a particular question or issue fell outside his expertise (see the Ikarian Reefer [1993] 2 Lloyd’s Rep 68 at 81, paragraph 4).

IAC say that the evidence, particularly the CCC test, shows that KAC’s remaindered and recovered data is materially inaccurate or unreliable. IAC say the most significant evidence on this point is the CCC test. I turn to consider the CCC test, while reiterating that regard must be had to all relevant evidence.

Mr Campbell was a conspicuously fair expert witness who was independent, balanced in his approach and prepared to make concessions when concessions were appropriate. His evidence in relation to the CCC test calls for careful analysis. At one point in cross-examination Mr Campbell said that he would put a figure of somewhere between $3 and $4 million on the under-recorded, adding, “that is done at some pace”. He said that if this approach was followed this would increase the credit for remaindered and recovered spares returned to operational stock by $3.5 million. After further matters were put to him Mr Campbell said that he would move to $4 million. But his evidence did not stop there. Mr Campbell’s conclusion at the end of his evidence was as follows: -

“I hope I have made it clear that I am … uncomfortable with drawing any arithmetic conclusion from these tests and, in particular, I am very uncomfortable in putting a dollar figure on it. I much prefer the formulation that I put into AFC 4, which is: yes, there may be some remaindered items not recorded but, overall, they make no material difference to the recovered and remaindered data”.

In my judgment Mr Campbell was right to distinguish between remaindered spares and recovered spares.

The following balancing factors may affect the consideration of the integrity of KAC’s data for remaindered and recovered spares: -

In broad terms I accept and prefer Mr Campbell’s analysis of the 17 factors. When appropriate weight is given to each of the 17 factors, I have no hesitation in finding that KAC’s recovered data is materially accurate and reliable. If over-recording of recovered spares is taken into account (as I find it should be) the resulting balance is neutral.

As to remaindered spares as KAC point out (i) there are far fewer remaindered spares than recovered spares and (ii) the majority of the remaindered spares were consumables, in relation to which unit of measure issues will have distorted any error and (iii) the CCC test covered only rotables.

In his first report Mr Campbell adopted the bottom of the range of percentages in the Securities and Exchange Commission “rule of thumb”, namely 5%, as an appropriate measure of materiality.

As to the CCC test, I accept Mr Campbell’s conclusion that there may be some remaindered items not recorded, but, overall, they make no material difference to the remaindered data. I reach this conclusion broadly for the reasons given by Mr Campbell (particularly in relation to the 17 factors), but also having regard to all other relevant evidence, including (without limitation) the unchallenged witness statements, the evidence of the witnesses called by KAC and the relevant documents.

I answer issue 1 in the negative.

2. Is any credit to be given to IAC for negative quantities and, if so, how much?

As IAC pointed out in its opening submissions, negative quantities is an unusual way to describe a possible excess. The expression has been coined because the Working Schedule states the number of missing spares under each part number as a positive number. Where, therefore, KAC recorded that it had got back more spares of a particular type than it had started with, the number of missing spares is negative.

It is common ground that this issue is confined to negative quantities of rotable and repairable spares, and that unit of measure difficulties are likely to be the reason for the discrepancies in relation to consumables/expendables.

IAC’s contention in relation to negative quantities is confined to rotable and repairable spares. These are unlikely to be affected by unit of measure issues, being individually valuable spares. The spares described as negative quantities are real spares taken back into KAC’s stock with an average value (at 60% MLP) of $4000 each. These spares have been recorded as remaindered or recovered and KAC has, or has had, the real tangible benefit of them. Six possible explanations are:

In relation to some part numbers, the number of remaindered or recovered spares returned by IAC is greater than the number recorded as held by KAC on 2 August 1990, resulting in what has been described as negative quantities. KAC’s case in opening was that the correct treatment of these spares in the Working Schedule was to ignore the negative quantities. For example, if KAC had 10 items on 2 August 1990 and twelve are shown as having been remaindered or recovered, KAC only claims in respect of the 10 it definitely had (even though it may have had more), and the negative quantity of 2 is ignored. When cross-examined, Mr Campbell assessed the detailed points put to him by Mr Davies and concluded that it would be fair to make a “guesstimate” of 60% credit to IAC in respect of negative quantities. KAC does not seek to depart from this approach. In addition to the 6 possible explanations listed above, KAC added - (7) The possibility that the stock at 14 June 1990 may have been incorrectly recorded. KAC submitted that it is impossible to know the causes of the negative quantities or to say precisely what proportion of the negative quantities is attributable to any one of the 7 possible explanations (or some other explanation). It is as easy to construct hypothetical examples which demonstrate that giving credit to IAC for negative quantities would be unfair, as it is to construct examples which demonstrate that giving credit to IAC would be fair. Materiality is also important to this issue. Mr Campbell’s estimate of the appropriate credit was 60% of the total value (at 60% of MLP) of negative quantities. As Mr Campbell made clear, this credit should only logically be given if the otherwise agreed credit for unmatched parts is reduced to take account of cases where the unmatched part is not included in KAC’s claim. Mr Campbell estimated the reduction to unmatched parts as 10%. Mr Villa’s alternative figure for the credit in relation to negative quantities was 90%. KAC submitted that this does not fairly balance the various possible causes for negative quantities and gives too much credit to IAC. Mr Campbell’s balanced figure is to be preferred.

IAC do not seek a credit for negative quantities of consumables.

In my view Mr Campbell’s approach to the issue as to negative quantities, when giving evidence, was exemplary. When a point was put to him in cross-examination which he considered had merit, he immediately accepted it. His approach seemed to me to be conspicuously fair, balanced and independent. As he pointed out when moving to 60% - “I do emphasise that it is purely an assessment. It is not based on any analytical calculation or analysis”.

In my view Mr Campbell’s approach to this difficult issue is to be preferred to that of Mr Villa. The uncertainties and complexities are such that it is not possible to take anything other than a broad view of this issue. If IAC had not behaved in the various respects outlined in the introduction to this judgment, it would almost certainly have been possible to analyse this issue with far greater precision. But IAC have not returned all the KAC records which they converted. There was a policy of hiding documents relevant to the litigation. IAC have not complied with orders of this court as to disclosure (including, without limitation, disclosure of all documents (whether in paper or electronic form) taken from KAC’s premises and the inventory made by IAC of KAC’s spares).

In my judgment credit should be given for 60% of all rotable and repairable spares which result in negative quantities, at the same rate as credits given generally (i.e. 48% MLP – see below).

3. Is the otherwise agreed credit for unmatched parts to be reduced to take account of credit given for negative quantities and, if so, by how much?

There is no overlap between the parts recorded as unmatched and those which are negative quantities. A part is one or the other, it cannot be both. Therefore there is no justification for any connection between the two categories. The agreed credit for unmatched part numbers is itself a broad brush exercise. Mr Campbell says that it should be adjusted to allow for the possible presence amongst the unmatched of items not claimed for, but he accepts that the proposed 10% adjustment is only a guess. In these circumstances, there is no basis to re-open the agreed credit for unmatched part numbers. That represents a reasonable broad brush exercise. There is nothing in the consideration of the negative quantity issue which justifies changing it on the basis of a guess at 10% adjustment. IAC therefore submitted that the unmatched parts credit should remain unchanged.

In relation to both the remaindered and recovered spares, Mr Campbell discovered that a number of part numbers could not be matched with those contained in the MSCS data. It was agreed between the experts that a credit of $4,926,116 (at 60% of MLP) should be given to IAC for these parts. If a credit is to be given for negative quantities (see Issue 2) it was Mr Campbell’s view that the credit for unmatched parts should be reduced to take account of cases where the unmatched part is not included in KAC’s claim. Mr Campbell estimated the reduction to unmatched parts as 10%.

In his Second Supplementary Report Mr Campbell stated that credit had been given in the Working Schedule for all parts within the KAC remaindered and recovered data where the part number did not match with the Working Schedule. He said (at paragraph 5.9) that in his view if any credit is to be given in respect of negative quantities, “it should be reduced or offset by whatever credit is wrongly given in the unmatched spares in respect of parts not claimed in the Working Schedule in the first place”.

When giving evidence Mr Campbell said “an unmatched part number cannot be identified, so we do not actually know that a part in the recovered and remaindered data is actually a KAC part, and is actually a KAC part that is included in the stock at 2.8.90. For example, it may relate to a government aircraft, a gulfstream or an HS125. Now, I cannot say that they do relate to such aircraft and I cannot say that they do not. But when looking at the balance of this whole question … I think this a factor that needs to be borne in mind. … But, [the Court], I fear is going to ask me how much. I cannot give you an answer because I do not know from the data what that credit should be. … I am in serious difficulty … because I really do not know. I certainly cannot demonstrate by definition that any individual part in the unmatched parts is not in the claim – I hope I have those negatives right. I cannot demonstrate that because I do not know what those parts are. Similarly, I cannot demonstrate that any of those parts are in KAC’s claim. I think the likelihood is that most of them are, but I suspect that there may well be some that are not … if you ask for a guess … I do not think it would be more than 20% of the 4.9 figure. I would have thought it was probably more likely to be of the order of 10%, as a guess … I do not wish to appear indecisive but it really is impossible to say.”

It is common ground that, subject to issue 3, a credit of $4,926,116 (at 60% of MLP) should be given to IAC for unmatched parts.

In view of the uncertainties fairly described by Mr Campbell, in my judgment credit should be given for 95% of unmatched parts at the same rate as credit is given generally (i.e. 48% MLP – see below). It is common ground that the proportion of KAC’s repair costs claim which relates to unmatched parts should be reduced by 5%, if credit is given for only 95% of unmatched parts.

4. Should any deductions be made from the Working Schedule to account for spares carried on the Iran Six or the Mosul Four?

In the Main Aircraft Action IAC was held not liable in respect of the Mosul Four. The position cannot be any different for spares carried on the aircraft, than it is for the aircraft. The point has therefore been decided against KAC by the Main Aircraft Action. Given the existence of the Perjury II claim, IAC would be content for this issue to follow the outcome of that claim.

It is correct that it was held in the Main Aircraft Action that KAC was not entitled to recover in respect of the Mosul Four. This was primarily because of the operation of the “but for” test, which was held to preclude liability under Iraqi law. It was held that the Mosul Four would still have been at Mosul, and thus destroyed by coalition bombing, even if IAC had not wrongfully interfered with them. The decision was dependent upon evidence of Iraqi law, evidence about what had happened to the aircraft and evidence about what might have happened to them absent IAC’s interference. No such evidence has been adduced by IAC in relation to the spares. There is nothing to demonstrate that they were still on the aircraft when they were moved to Mosul, or that they would still have been on the aircraft if IAC had not taken them. IAC has no defence to the claim for the spares carried on board. KAC’s fall-back position is that the claim should be hived off to be dealt with in the Perjury II action, applying the general determinations that will be made in this action as to value.

I direct that this issue (now confined to spares carried on the Mosul Four) should be dealt with in the Perjury II trial. I will give appropriate directions to achieve this (if the same cannot be agreed).

5. What deductions should be made from the Working Schedule to account for spares held at Cairo?

KAC initially claimed for all Airbus A300 and A310 spares held at KAC’s outstation at Cairo on 14 June 1990. This was on the basis of evidence from KAC that those spares were located at Cairo to support the lease of three Airbus A300 aircraft to Egypt Air, that those leases and the need for the supporting spares had come to an end, and that the spares were therefore flown by KAC from Cairo to KIA in late July 1990. The sample testing of CCCs demonstrated that at least nine of the spares claimed to have been moved in July 1990 remained in Cairo in 1991, and therefore cannot have been moved to KIA and converted by IAC. Those spares were substantial, being claimed at a total of US$420,156 at 100% MLP. In opening, KAC accepted that the spares identified by Mr Villa should be deducted from the claim, that some further spares forming part of kitty stock (a basic stock of spares) would also have remained in Cairo and that a further credit of US$231,696 at 100% MLP was likely to be reasonable to take account of those spares.

Some Airbus spares were shipped from Cairo to KIA on 31 July 1990. Although these spares were shown in the MSCS data for 14 June 1990 as being at Cairo, they were originally included in KAC’s claim on the basis that they were at KIA by 2 August 1990. Mr Villa has calculated that nine of the spares at Cairo were not returned to KIA until 1991. These total $420,156 at 100% MLP. KAC accepts that this sum should be deducted from its claim. KAC also accepts that some further discount for other kitty stock left at Cairo should also be made – the figure of $231,696 at 100% MLP is proposed. KAC’s claim in relation to this issue is, therefore, in the sum of approximately $1.2 million. Mr El-Atta explained that there were three types of spares at KAC’s Cairo base: (i) spares to support KAC’s normal day to day operations; (ii) 3 or 4 items held specifically as part of a pooling agreement with other airlines; and (iii) spares held to support the dry lease to Egypt Air of two A300 aircraft. This evidence was supported by that of Mr Al-Khulaifi. Mr El-Atta’s evidence was convincing. A substantial quantity of spares, a significant number of which were very valuable, were shipped back to Kuwait shortly before the invasion. It is impossible to say precisely how many. The speculations of Mr Villa cannot reasonably cast doubt on Mr El-Atta’s clear evidence. Whether or not there was a list of parts returned to Kuwait, it can no longer be found. The absence of a list does not amount to a reason to doubt the clear evidence of Mr El-Atta. KAC’s proposed deduction in respect of kitty stock is more than reasonable. The test on the CCCs included the 150 highest value items for which cards were available, so that there are unlikely to be a significant number of high value rotables which remained in Cairo.

Mr El-Atta was a Maintenance Engineer in Cairo at the time of the invasion. He is now Cairo Station Maintenance Manager. Mr El-Atta gave evidence as to the three categories of spares held at Cairo (station spares, spares held for the purposes of pooling arrangements and spares held in relation to lease operations).

Mr El-Atta explained his role in relation to the return of spares to Kuwait, when the lease of aircraft 9K-AHI ended in July 1990. According to Mr El-Atta the aircraft carrying spares back to KIA arrived at KIA on 1 August at 2.30 am local time.

Mr El-Atta said that the storekeeper loaded spares into containers. Mr Al-Atta personally placed valuable, fragile items (navigation items, computers and flight control computers) in the first class lounge. There were 20 to 25 boxes containing such items. Mr El-Atta said he saw about 4 pallets and two containers. All the freight holds forward and aft were full of the spares (plus the items he positioned in the cabin). I accept this evidence. Mr El-Atta’s account seemed to me to be convincing and credible.

It would of course be far more satisfactory if a list of parts returned to Kuwait could be found. The events (following the invasion) described in this judgment precluded KAC from finding such a list at KIA. There is no evidence that KAC deliberately withheld any material documents still in Cairo.

It is common ground that $420,156 and $231,696/$250,000 must be deducted from $1,862,406. The dispute is as to the balance. I find that the probability is that the majority of the balance was placed on board the aircraft which arrived at KIA on 1 August at 2.30 am local time.

In my judgment $862,406 calculated at 100% MLP (excluding AOG and duty) should be deducted from KAC’s claim.

6. Is KAC’s claim for Simulator Spares barred by the consent order of Langley J dated 4 May 2001?

KAC is not entitled to pursue a claim for simulator spares because the parties agreed on 1 May 2001 (and it was so ordered by consent by Langley J on 4 May 2001) that no claim at all could be made for simulator spares.

By letter of 4 August 2000 KAC’s solicitors stated that KAC intended to pursue a claim for simulator spares. By a letter dated 12 December 2000 KAC’s solicitors wrote, “We have re-examined the Schedules … unfortunately, as you point out … it is apparent that the G3 and HS125 stores and simulator referred to in the Annexes to our clients’ Writ were omitted from the Schedules. This was an error, for which we apologise”. On 14 February 2001, IAC’s solicitors wrote pointing out that in their view the case was subject to an automatic stay. In April 2001, KAC sought to further amend the Points of Claim and served a draft amended pleading with revised Schedules (“the April 2001 Schedule”). The April 2001 Schedule was in the same format as its predecessors. However it now contained new numbered sections of spare parts for the G3, HS125 and Boeing 727 government aircraft. In his witness statement of 26 April 2001 in support of KAC’s application for permission to re-amend the Points of Claim, Mr Gooding of KAC’s solicitors said “It was also clear that items claimed in the Writ, namely spares for the aircraft G3 and HS125 and simulator spares were missing from the Schedule. The Schedule has been amended to include the G3 and HS125 spares.” IAC objected to the proposed amendment and asserted that an automatic stay was in place. Negotiations and correspondence between the parties followed a case management conference on 6 April 2001 before Langley J. Agreement was reached and that agreement is reflected in the May 2001 consent order. In return for IAC agreeing to the lifting of any automatic stay of the proceedings, KAC agreed not to proceed with any claims described in paragraphs 2 and 3 of the Order. The one impression which it is impossible to take away upon reading the whole of the Order, is that KAC would be pursuing any further claim for simulator spares.

Prior to the consent order, both parties believed that simulator spares had not been included in the 1996 and 1997 Schedules. This belief had originated in assertions made on behalf of IAC. The error was mistakenly accepted by KAC’s solicitors. IAC’s April 2001 strike out application (in relation to simulator spares) was premised on the false suggestion that such spares had not been included in the 1997 Schedule. Had IAC ascertained the true position, it would not have made the application at all. Had KAC ascertained the true position, it would have realised that it did not need permission to amend to claim for simulator spares. Accordingly the only ground for challenging the consent order can be on the basis that it was entered into by a mutual mistake, in so far as simulator spares were concerned. Since the simulator spares had always been claimed by KAC, and KAC did not in fact need permission to amend to include them in May 2001, there is no basis now for precluding KAC from claiming them.

The intention behind the consent order was to do no more than exclude any claim which had not already been particularised in the Schedules that then listed the individual spares claimed in KAC’s pleadings of 1996-1997. There is no reason why KAC should not be entitled to recover for the conversion of any simulator spares which were referred to in the Writ.

The consent order dated 4 May 2001 provided so far as material:

“(1)

Subject to paragraphs 2-5 below the claimants have permission to re-amend their Amended Points of Claim in the form served in draft on the defendant on 3 April 2001 …”

(2) The claimants’ claims in respect of:

(3) For the avoidance of doubt the claimants confirm that no claim is made in respect of any spares not referred to in the Schedule to the draft Re-Amended Points of Claim and in particular no claim is made in respect of:

The focus of paragraph 2 of the order was that the claims there identified (spares for G3 and HS125 aircraft and DPI stock) were withdrawn from the Schedule to the draft Re-Amended Points of Claim.

The focus of paragraph 3 of the order was to confirm that no claim was made in respect of any spares not referred to in the Schedule to the draft Re-Amended Points of Claim.

Thus the order distinguished between: -

Had the parties intended to delete existing claims in respect of simulators from the Schedule, such claims would have been mentioned in paragraph 2 of the order. On its true construction paragraph 3 confirms that no claim is made in respect of any spares not referred to in the Schedule. It does not delete existing claims from the Schedule. KAC are precluded by paragraph 3 of the Order from claiming in respect of any conversion of simulators (i.e. simulator spares) not referred to in the Schedule (and this limitation KAC accepts). But paragraph 3 on its true construction does not preclude KAC from claiming in respect of simulator spares referred to in the Schedule.

Paragraph 3 is to be construed as though a comma appeared after the words “the draft Re-Amended Points of Claim”. The sub-paragraphs (a) to (c) refer to particular claims, to the extent that they were not itemised in the Schedule. Sub-paragraphs (b) and (c) specifically state that no claim is made in respect of the claims there referred to “in so far as not itemised in the said Schedule”. It is true that these words do not appear in (a) after the words “any conversion of simulators”, but this is probably because the parties mistakenly thought that no claim in respect of simulator spares was included in the Schedule. To the extent that such a claim was included, on its true construction paragraph 3 of the order did not have the effect of deleting it.

For these reasons I do not consider that $1,577,971 (at 100% MLP) should be deducted from KAC’s claim.

7. Is 100% MLP the correct starting point for KAC’s claim in respect of the spares in the Working Schedule, and, if not, what is the correct starting point?

The market value of goods is the value at which they could have been sold in the condition they were in immediately before the expropriation. In the case of used or second-hand goods, this is their used or second-hand value.

In the Main Aircraft Action KAC did not claim damages for the Mosul Four on the basis of MLP or new for old. Instead the contest was between two different measures of the like for like or second-hand value of the aircraft, namely the ‘current market price’ basis and the ‘fair market value’ basis. The Court of Appeal held that the correct measure was the CMP. This was the value of the aircraft in the second-hand market. KAC is asking the court to proceed on the basis that aircraft, engines and spares fitted to aircraft and engines are valued on a like for like basis, but spares which are held in stock are valued differently on a new for old basis. New for old replacement cost is not the same thing as market value.

It is unrealistic to suppose that KAC could have purchased replacement spares in the necessary quantities on the second-hand market, even if it had been minded to do so (which it was not).

The aim of the law, in respect of the wrongful interference with goods, is to provide a just remedy. Normally the measure of damages is the market value of the goods at the time the defendant converted them. This is the general rule, because generally this measure represents the amount of the basic loss suffered by the claimant owner. The claimant has been dispossessed of his goods by the defendant. Depending on the circumstances some other measure, yielding a higher or lower amount, may be appropriate. (See paragraph 225 above).

I turn to consider what was the market value of the spares at the time IAC converted them.

In assessing market value regard must be had to the relevant market and to all the relevant circumstances of the particular case. An appropriate balance must be struck between a buying price and a selling price, having regard to all the relevant circumstances of the case.

The Court of Appeal held that if IAC had been liable for the conversion of the Mosul Four, the correct basis for beginning to value their loss to KAC would have been Current Market Price as defined in paragraph 247 above. The definition included the following “the most likely transaction price that may be generated for an aircraft under prevailing market conditions that are perceived to exist at the relevant time. … The CMP could reflect the cost that would need to be incurred/paid to replace the aircraft for a ‘like for like’ aircraft if available. CMP also reflects the most likely realisable cash amount in the event that the aircraft was to be sold at a specific date …” Thus CMP took into account the cost of replacement and also the likely realisable amount in the event of a sale.

KAC’s policy when purchasing spare parts prior to invasion was to purchase only new aircraft parts from AMs or OEMs and their approved appointed distributors. The only time KAC deviated from this policy (prior to invasion) was when a KAC aircraft was in an AOG situation – where there was no operational option other than to buy from other sources including other airlines. Priority would then be given to airlines or vendors holding new parts which could be traced back to AMs or OEMs. Prior to the invasion, KAC’s inventory was very largely made up of spares that came from AMs or OEMs or, in either case, from an approved appointed distributor.

Thus KAC’s stock of spares at the date of conversion had been acquired new from the very best available sources, to ensure the highest possible standards of safety and airworthiness.

An assessment of the market value of the spares at the date IAC converted them must give appropriate weight to all the complex facts and circumstances of this case, including (without limitation) the following.

The evidence as to the limited extent of betterment is a reflection of the nature and quality of KAC’s stock of spares at the time of the invasion. The spares had been purchased in the best available market (see (4) above) and serviced/overhauled to the highest standards (see (5) above).

8. Should KAC’s claim be reduced below 100% MLP because some of its spares became surplus after KAC’s return to KIA and, if so, by how much?

If any further reason is needed not to award KAC damages based on 100% of MLP, it can be found in the post-invasion surplus. Post-invasion, KAC found itself with a very large quantity of surplus spares. If it had gone out and replaced all of its old spares, it would simply have been adding to the surplus which it had to sell. If KAC had ‘reinstated’ by going out and buying new spares to replace as exact replacements for all their old spares, then the vast majority of their purchases would immediately have become surplus and sold. KAC cannot recover the cost of replacement or reinstatement when, if it had in fact incurred that cost, it would only have been to put the spares straight back on the market as surplus.

Once KAC had returned to KIA and had a chance to collect the remaindered and recovered spares and returned to more normal operations, there were a number of spares which it could not use for a variety of reasons: -

Spares which were no longer required for these reasons were declared surplus and either sold, or offered for sale.

Thus KAC accepts that a proportion of its spares were rendered surplus as a result of the events surrounding the invasion, including the decision to purchase a new fleet after liberation.

KAC’s claim should not be reduced on the ground that some spares were declared surplus after KAC’s return to KIA for three reasons: -

I refer to the relevant legal principles set out above.

Normally the measure of damages for conversion is the market value of the goods at the time the defendant converted them.

The Earl of Halsbury LC asked in The Mediana [1900] AC 113, 117, if a person took away a chair from his room and kept it for 12 months, could anybody say you had a right to diminish the damages by showing that I did not usually sit in that chair, or that there were plenty of other chairs in the room?

On proof of the tortious destruction of a chattel, the owner is prima facie entitled to damages reflecting the market value of the chattel “as is”. He is so entitled whether or not he intends to obtain a replacement (the Maersk Colombo).

I accept KAC’s submission that KAC was entitled to retain as high a stock of spares as it chose, and to recover damages for conversion at the same level for that entire stock.

Further (as KAC point out) no analysis has been undertaken by Mr Villa to identify whether spares declared surplus (a considerable time after the invasion) were acquired by KAC after the invasion as PIPs, and then duplicated spares later returned by IAC.

I answer this question in the negative.

9. Should KAC’s claim be reduced because of betterment and, if so, by how much? What percentage should be deducted from what figure to take account of betterment?

10. Could KAC have obtained a bulk purchase discount and, if so, how much, and what is the effect of such a discount on KAC’s claim? What percentage should be deducted from what figure to take account of bulk purchase discount?

11. Is KAC entitled to an additional 3.75% in respect of AOG purchases?

12. Is KAC entitled to an additional 4% in respect of customs duty?

13. How much credit should IAC be given for remaindered and recovered spares?

KAC is an airline not a spares trader. Its damages in respect of spares returned to it are not to be measured on a difference in value basis, but by proof of actual loss. KAC’s position is identical to that of the plaintiff in Brandeis Goldschmidt & Co. Ltd v Western Transport Ltd [1981] QB 864. KAC has not proved any actual loss and cannot rely upon an alleged change in market value. Mr Sturrock’s evidence as to taint was profoundly unsatisfactory. He was unable to give any satisfactory explanation as to why he had valued remaindered and recovered spares at 60% of MLP in his first report, if they were in fact only worth 48% or 50% of MLP. There is no reason why spares should suffer from taint when aircraft did not, or why, if spares did suffer from taint, it should be to the extent of 20%, when the highest it was put for aircraft was 2-3%.

When considering this issue it is important to have regard to two distinct elements: -

It is regrettable that Mr Sturrock did not address these elements fully in his first report. In his report dated May 2004 he posed the question – if the same two parts of the same age are on the desk in front of you in identical serviceable condition, one with full traceability, and one with traceability missing a year and a half – what is the difference in price in the secondary market? He answered this question as follows. The provision of a full traceability is of vital importance to many buyers. Some buyers would not accept a part without full traceability – others will be content with traceability from the last repair agency/shop. The basis of valuing spares on the secondary market referred to in his first report, was all on the assumption that satisfactory full traceability was available for the parts in question. Where full traceability is unavailable, a spare (even if fully overhauled) would be worth in the region of 20% less than it would otherwise be worth. For example, if the MLP for a particular item was $100, it would normally have been worth $60 in 1990, when used but fully overhauled. If it did not have full traceability it would only be worth about 48% of MLP, even if fully overhauled. As to stigma/taint, as a large number of spare part dealers are located in the United States, many dealers would not have been keen to purchase items which had been in the custody of IAC (even if fully overhauled).

Mr Williams (a spares expert instructed on behalf of IAC) was not called to give evidence. Mr Villa has no experience of dealing in spares. An expert witness should make it clear when a particular question or issue falls outside his expertise. Mr Villa failed to do this.

Further it should be remembered that KAC used remaindered and recovered spares as a last resort. Mr Al-Khulaifi said that on return of remaindered and recovered spares from outside repair facilities, the re-certified stock was placed back into the bonded stores. The re-certified stock was clearly identified as ex-Baghdad or remaindered stock. Both as a matter of KAC policy and in practice, ex-Baghdad stock was used as a last resort. Mr Joseph said that, following re-certification of recovered spares at the appropriate agencies, these spares were placed into the stores with the mark CNB (Credit Note ex-Baghdad) upon their respective service tags. This was noted upon the spare part (by the Receipts Section) in order to record that the spare part had come from Iraq. KAC used these spare parts as a last resort, or where there was no other option.

For these reasons in my judgment IAC should be allowed a credit of 48% of MLP for remaindered/recovered spares which were not scrapped.

14 Is KAC entitled to $783,568 in respect of warehousing costs for spares, and, if not, how much?

IAC does not accept that the rent constitutes consequential loss recoverable from IAC (although the quantum of the claim is agreed). The cost was caused by the damage to KAC’s premises at KIA, for which IAC was not responsible. The warehouse expenditure was not a consequence of IAC’s interference with KAC’s spares. It resulted from (i) the structural damage done to KAC’s premises at KIA in the course of the Iraqi invasion, and war damage when the coalition expelled Iraqi forces from Kuwait; and (ii) the arrival of a stock of new spares for KAC’s new fleet. Prior to the invasion KAC had plenty of spare storage space. This claim has not been proved and should be rejected.

KAC’s evidence is that it needed the rented the warehouse to store and process the remaindered and recovered spares. The only reason the additional warehouse costs were incurred was because storage space was required for the remaindered and recovered spares. KAC would not have suffered these losses if IAC had not taken its spares. IAC cannot avoid liability on the basis that other factors, such as the war damage to the old bonded store, made conditions even more difficult for KAC than it would otherwise have been.

Mr Al-Khulaifi said in his sixth witness statement “Mr Villa questions whether the warehouses that were leased were used only for the processing of the returned spares. The majority of the recovered spares/tools were stored in the leased warehouses due to the limited space available to accommodate the spares purchased in Cairo and Kuwait to support the remaining KAC fleet, the spares procured to support the Polaris aircraft and the newly purchased fleets, in addition to the returned parts from Iraq.” I accept this evidence. In my judgment KAC are entitled to recover the reasonable costs of leasing premises in order to process the remaindered and recovered spares. I refer to the relevant legal principles set out above. Provided the amount is not out of proportion to the value of the goods, the wrongdoer ought to reimburse the owner for any money spent on recovering the goods or carrying out necessary repairs.

The particulars of this claim are set out in a facsimile from Mr Al-Khulaifi dated 29 March 2004. In my view the periods claimed are unreasonably long. Mr Davies helpfully provided me with calculations in relation to two warehouses from 1 June 1992 to the end of 1994 and to the end of 1995. In the light of those figures I assess this head of claim at $175,000.

15. How much is KAC entitled to claim in respect of Post Invasion Purchases?

For the reasons I give below under Issue 18, KAC is entitled to recover PIPs referable to lost spares only, plus interest from the date of purchase.

16. Should $398,614 be deducted from KAC’s claim in relation to engine number P701652, or any, and, if so, what sum?

17. Is KAC entitled to $3,200,000 in respect of a replacement engine for engine number P689597, or only $1,430,105, or how much?

It is common ground that engine number 689597 had been used for 5,315 hours since refurbishment and that it only had just under 700 hours of available use before requiring an overhaul. The minimum cost of such an overhaul is $2 million. Engine number 689597 was replaced with a 7JT9D7J engine which had zero hours since its last refurbishment. It is common ground that the replacement engine had 6000 hours of use available before it would require overhaul. There was a real practical difference between the engine that was taken and not returned, and its replacement. The experts agreed that a fair means of estimating the difference between engine number 10 which had 5,315 hours of use remaining and its replacement, which had zero hours, was to multiply the number of hours of use by $333. That amount is the overhaul cost spread over the 6000 hours of life of the engine. $1,769,895 is therefore the agreed value of the difference between the two engines. The only issue is whether the amount of $1,769,895 constitutes betterment for which KAC is obliged to give credit. Applying the Baltic Surveyor, IAC must be credited with the advantage which KAC obtained from the replacement engine with zero hours of use. The advantage obtained is that the cost of refurbishment ($2 million) is 5,300 hours further away. The cost of the replacement engine was $3,200,000. KAC has claimed the full amount of the replacement. From this sum must be subtracted the amount of $1,769,895 which reflects the advantage KAC obtained.

KAC purchased various replacement engines in Cairo, including two JT9D-7Js. Mr Braithwaite (the expert instructed by KAC) compared these engines in terms of condition and hours/cycles use, with the available information as to the engine taken by IAC at the time of the invasion. He concluded that engine 662741 more closely resembled the lost engine and, therefore, evaluated KAC’s claim as the cost of that replacement engine, namely $3.2 million. Mr Braithwaite said that flag carrying airlines do not normally buy used engines which have not been for a major overhaul immediately prior to purchase. “You cannot go and buy an engine with time on it to match it exactly, nor would you from a technical regulatory point of view. It would be unsound and not possible.”

IAC has adduced no evidence to show that engines with 5000 hours use were available for purchase in 1990. It is inherently unlikely that such an engine would be offered for sale in the normal course of events.

The betterment arising from the purchase of an engine with zero hours was unavoidable and should not be taken into account (see Harbutt’s Plasticine v Wayne Tank.

I refer to the relevant legal principles set out above and in particular paragraph 251 Betterment and New for Old. Cases where a claimant recovers more than he has lost are as a matter of principle exceptional. The true principle is that in the relevant cases the betterment has conferred no corresponding advantage on the claimant. Where mitigation has brought measurable benefits to a claimant, he must give credit for them.

Engine P689597, which was a JT9D-7J used on Boeing 747s, was taken by IAC and not returned. It has still not been returned, although it is admitted by IAC that a KAC engine is on an IAC aircraft in Tunisia, which KAC says can only be this engine.

In my judgement mitigation has in this case brought measurable benefits to KAC, and KAC must give credit for them. The replacement engine, when purchased, had zero hours usage since refurbishment, whereas the lost engine had 5,315 hours usage since refurbishment at the time of the invasion. A reasonable reduction would be $333 per hour flown i.e. $1,769,895. KAC’s claim should be reduced to $1,430,105.

18. Is KAC entitled to user damages, and, if so, how much?

Mr Davies’ submissions in relation to Issue 18 (as provided) in July were as follows.

IAC draws attention to five points, each of which provides a ground upon which KAC’s claim to user damages should be either denied or heavily curtailed.

Mr Vos’ submissions in relation to Issue 18 were as follows.

The possibility of using KAC’s stores was discussed at an early stage within IAC. Warehousing and engineering staff were sent to KIA on about 12 August 1990, and instructions were given for a full inventory to be taken. David Steel J found that, at a meeting chaired by Mr Saffi on 18 August 1990, it was arranged for Mr Al Shaikhly to take up station in Kuwait so as to supervise the stores there (as confirmed by the later Administrative Order). There are a large number of documents showing that spares were shipped from KIA to Baghdad and that lists of them were prepared. David Steel J found that, by 25 August 1990, Mr Saffi was proceeding on the basis that IAC could properly regard the effect of the purported merger and integration of KAC into IAC as being that the KAC fleet was to all intents and purposes part of, and to be operated with, IAC’s fleet. He said that this view received further support from the content of the Na’ama Diary in the period between 24 August 1990 and 9 September 1990 “from which it would appear that KAC stores and equipment were systematically removed from Kuwait and brought into Iraq”. The meeting note of 28 August 1990 stated that it had been resolved that “the Governate of Kuwait should be taken as a base to store the reserve spares for Airbus aircrafts (Air-Bus) & (B767) and for Baghdad to become a base for reserve spares for the (B747) & (B727) aircraft. These reserve spares should be brought into Baghdad and entered into the Company’s stores”. Mr Saffi’s letter of 3 September 1990 to the office of Mr Al Zubaidi headed “inventory” reported the agreement “that the items belonging to Kuwait Airways should be transferred for use by the Iraqi Airways Co. to operate the Kuwaiti aircraft fleet” and referred to the preparation of inventories and the transfer of spares to Baghdad. IAC requested the Iraqi government to issue a resolution to transfer all KAC’s assets to IAC, including spares. RCC 369 was ultimately passed as a result of these requests. IAC’s legal department prepared a working paper dated 19 September 1990 which referred to the preparation of inventories of all spares for the KAC aircraft and the intention that certain items would be set aside for sale. Lists of all spares brought from Kuwait were provided to the Iraqi government. IAC objected to KAC equipment being used by the Iraqi DGCA.

In Lord Nicholls’s speech in the Main Aircraft Action, he held (paragraph 43) that IAC’s acts in relation to the Iran Six and Mosul Four were sufficient to constitute conversion. Lord Nicholls said that:-

“IAC intended to keep the goods as its own. It treated them as its own. It made such use of them as it could in the prevailing circumstances, although this was very limited because of the hostilities. In so conducting itself IAC was asserting rights inconsistent with KAC’s rights as owner. This assertion was evidenced in several ways. In particular, in September 1990 the board of IAC passed a resolution to the effect that all aircraft belonging to the (dissolved) KAC should be registered in the name of IAC and that a number of ancillary steps should be taken in relation to the aircraft.”

The board resolution referred to by Lord Nicholls shows that one of those ancillary steps was “The import, purchase and storage manager shall proceed with the bringing of the spare parts for the mentioned aircrafts and to prepare storage”.

The key factual elements which trigger liability for user damages are that: -

The extent of actual use is not material, save as evidence of the implementation of the intention. As a matter of law, it is not necessary to show that IAC made actual use of each and every spare.

In fact, there is substantial evidence of actual use, including:-

The references in Mr Na’ama’s diary are incidental. Mr Na’ama was the engineering director and was not concerned with spares and their use. It can be inferred, if necessary, that actual use was substantially more extensive.

The evidence demonstrates that IAC removed a large number of KAC’s spares to Baghdad and to other destinations such as Tunis (where at least an engine was incorporated into an IAC aircraft) and Jordan. The spares which IAC left behind at Kuwait were carefully listed and looked after. IAC fitted some of KAC’s spares to its own aircraft or to aircraft taken from KAC. It is to be inferred that IAC was using KAC’s spares in its aircraft operations.

The applicable principle established by the authorities is that where the defendant has committed a tort in respect of the claimant’s property (whether land or chattel) such that the defendant has had the use of it (or the ability to use it) and deprived the claimant of the use of it (or the ability to use it) the defendant is liable to pay damages to the defendant for that ability to use.

Relatively little is required to establish user for the purposes of a claim for damages on this basis. The way in which IAC benefited from holding KAC’s spares is not materially different from the benefit to the theatre owner in Strand Electric or the hotelier in Inverugie. The claimant’s goods were retained by those defendants for the purposes of their business. Whether they actually made use of them or not was irrelevant. IAC enjoyed the beneficial use of KAC’s spares in the sense necessary to found a claim for user damages.

The claimant does not have to prove that he would have been able to charge anyone for use of his property, in order to recover damages pursuant to the user principle. It was pointed out by Mance LJ in Experience Hendrix that there could be, in a sense, some artificiality about such damages if it was clear that the claimant would not have granted permission for such use on any terms. Nevertheless, that was not a bar to the remedy. It matters not that KAC was not in the business of leasing spares. Lord Nicholls indicated that the relevant criterion is that the defendant received a benefit, not that the claimant lost the opportunity of leasing his property. This principle is reflected in Mance LJ’s comment in Experience Hendrix that the law gives effect to the instinctive reaction that the wrongdoer ought not to gain an advantage for free. KAC used its spares in its profit-making business. IAC cannot avoid having to compensate KAC for its use of those spares simply by pointing to the fact that KAC was not in the business of leasing them, or that it would not have voluntarily leased them to IAC. In fact, KAC did lease spares inter-airline prior to the invasion through the GCC Pool.

Value damages and user damages are not alternative remedies, between which there must be an election. Nonetheless, the Court will obviously wish to ensure that there is no double recovery.

There was disagreement between the members of the Court of Appeal in Ashman as to the juridical basis of an award of user damages. Hoffman LJ favoured a restitutionary analysis, Lloyd LJ favoured a compensatory analysis deriving from Whitwham, and Kennedy LJ spoke of “quasi-contractualrestitution”. Lord Lloyd, in Inverugie, had the last word in relation to this disagreement, saying that the user principle need not be characterised as exclusively compensatory or exclusively restitutionary because it combined elements of both. Lord Nicholls explained in Blake that there is a clear difference between an account of profits awarded in equity and compensatory damages awarded by the common law (including user damages). His view was that “such awards are probably best regarded as an exception to the general rule”; in other words user damages are in a special category of common law damages.

Tang Man Sit v. Capacious Investments [1996] 1 AC 514 dealt with the inconsistency between an account of profits on the one hand, and compensatory damages on the other. A claimant who brings a claim for breach of fiduciary duty must elect between claiming damages and an account of profits. But this does not assist IAC. For an election to be necessary, there must be a true disgorgement remedy available, or perhaps a true restitutionary remedy (see Hart J in Westminster City Council v. Porter [2003] Ch 436 at 451, paragraphs 2 and 3).

A user damages claim is to be assessed by reference to the normal lease rate that the defendant would have had to have paid to hire the goods for the period of their detention (the “lease rate claim”).

The lease rate claim does not compensate the claimant for the loss in value of the goods upon their return, or the total loss of the goods if they are not returned (the “loss in value claim”). In order to compensate the claimant for this element, the loss in value must be added to the lease rate claim.

There is no authority as to whether the loss in value claim should be assessed either:-

It is logical (but not necessary) to assess user damages on the basis of the lease rate claim, plus whatever loss in value is sustained from the goods having been returned in poor condition after a putative lease (the ‘residual value basis’). Mr Sturrock’s evidence was that a lease of spares would normally contain terms providing that the parts are returned in an overhauled condition. If this latter basis of calculation is adopted, the value damages which were the subject of the main part of the trial would not be payable in addition.

In the alternative, the Court could award the lease rate claim plus whatever loss in value damages would have been awarded pursuant to the assessment in the main trial (the ‘value damages basis’). It seems likely that this latter method would result in somewhat lower figures (at least in some cases).

In Whitwham, the claimant seems to have recovered damages for the diminution in value of his land in addition to damages for the defendant’s use of it.

In Strand Electric, Denning LJ said (at page 255):-

“If the goods are retained by the wrongdoer up till judgment, the hiring charge runs up to that time, and in addition the owner will get the return of the goods or their value at the time of judgment … but if the goods have been disposed of by the wrongdoer the hiring charge will cease at the time of such disposal, but the owner will get in addition damages for the loss he has sustained by the conversion, which is usually the value at the time of conversion.”

Parker J said in Ryjack that an “owner can recover by way of damages a hire charge plus either the return of the chattel or, if there has been a subsequent conversion by disposal, the value of the chattel at the date of such conversion”.

Nicholls LJ appeared to envisage the possibility of user damages in addition to value damages in IBL v. Coussens, and in the Main Aircraft Action, where, as Lord Nicholls, he expressly said that “in an appropriate case the court may award damages on this ‘user principle’ in addition to compensation for loss suffered”.

Lease rate damages can thus be awarded in addition to value or other consequential damages.

In this case, the losses in addition to user arise from:-

The determination of the correct lease rate to be applied in the calculation of user damages is to be taken in two stages: -

The rate which IAC would have had to pay in the market to lease any spares would have been considerably in excess of the rate which other market users would have paid. An award of user damages is to recognise that a converter who takes and uses the property for his own purposes must pay for that use. If IAC is ordered to pay a market rate which would not in fact have been available to it, IAC will be better off by having taken the spares than it would have been had it leased them.  IAC should pay what the market would have charged it.

If KAC’s primary submission is wrong, and the “normal”market rate (without regard to the circumstances of the particular defendant) is the correct starting point, the second stage of the assessment is to decide on whether an adjustment should be made to the market rate to take account of “anything special in the particular case” (per Megaw LJ in Swordheath). This will be particularly applicable where there is no “free market” (per Kennedy LJ in Ashman). See further the comments of Barker J in the New Zealand case of Roberts v Rodney.

It is appropriate to apply an uplift to the market rate in this case, because of the following 7 aggravating factors: -

There was no free market and IAC was far from a normal lessee. In these circumstances, a fair and reasonable rate of damages ought to take into account the fact that the benefit to IAC was far greater than to a normal converter of goods.

It would be possible to award user damages, on the basis of interest on 100% MLP (or even on a lower value), for the period of the notional lease.

This would be inappropriate and unjust to KAC for the following reasons:-

The hypothetical lease rate is to be paid “during the period of the detention” (per Romer LJ in Strand Electric). This was the basis of the calculation in Whitwham, Strand Electric, Ryjack, Ashman and Inverugie. Denning LJ pointed out in Strand Electric (at page 255) that, where goods have been returned, the hiring charge: -

“… runs up to the date when the goods were returned. It starts from the very moment when the defendants took possession of the goods. They had, it is true, a reasonable time to make inquiries as to title, but once that time expired and they wrongly decided to retain them, then the wrong related back to the first taking. It became wrongful ab initio.”

In the case of the remaindered and recovered spares the period of the lease ought to run until the spares were back in KAC’s possession. In the case of the lost spares, the period may depend on whether IAC retained them, sold them or otherwise disposed of them. IAC cannot complain if detention until the date of judgment is assumed against it.

The start date for any hypothetical lease should be 9 August 1990, the date from which IAC has admitted liability for all spares at KIA.

The remaindered spares were not restored to KAC until the middle of February 1991 at the earliest, but it is accepted that IAC’s use must have come to an end when it ceased to have control of KIA in anticipation of the Gulf War. KAC is prepared to assume, in IAC’s favour, that the hypothetical lease should end at that time, although the precise date on which IAC lost control of KIA is unclear. The war commenced on 17 January 1991. The documents show that instructions were still being given on 29 December 1990 to bring technical books, together with their shelving, from KIA and on 2 January 1991 to bring other spares. An end date of the hypothetical lease of 31 December 1990 is reasonable.

KAC’s alternative claim for value and consequential damages in respect of remaindered spares, apart from user damages, is as follows: -

Interest on these value and consequential damages should run as follows: -

This leaves KAC uncompensated for the period during which IAC used the remaindered spares, from 9 August 1990 to 31 December 1990. The period amounts to 4 months and 22 days.

The additional user element adjustment to compensate KAC for this period of IAC’s user of the remaindered spares is calculated as follows: -

Interest on the additional user element should run from the end of the notional lease period, namely 31 December 1990.

The start date of the hypothetical lease should be 9 August 1990.

The recovered spares were returned by IAC in tranches on 23 January 1992, 19 March 1992, 19 to 21 May 1992 and 12 September 1992. KAC proposes that 20 May 1992 is taken as the end date of the hypothetical lease of all the recovered spares. This represents a reasonable mid-point between 23 January 1992 and 12 September 1992.

KAC’s alternative claim for value and consequential damages, apart from user damages, is for: -

Interest on these value and consequential damages should run as follows: -

This leaves KAC uncompensated for the period during which IAC used the recovered spares, from 9 August 1990 to 20 May 1992. The period amounts to 21 months and 11 days.

The additional ‘user’ element adjustment to compensate KAC for this period of IAC’s user of the spares is calculated as follows: -

Interest on the additional user element should run from the end of the notional lease period, namely 20 May 1992.

The start date of the hypothetical lease must be 9 August 1990.

It is more difficult to determine the end date of the hypothetical lease since the lost spares were, by definition, never returned. A fair way of resolving this difficulty is to work on the basis that the hypothetical lease came to an end on 12 September 1992, when the last of the recovered spares were returned. At that time KAC can be taken to have known that no further spares were likely to be returned by IAC.

KAC’s alternative claim for value and consequential damages in respect of remaindered spares, apart from user damages, is as follows: -

Interest on these value and consequential damages should run as follows: -

This leaves KAC uncompensated for the period during which IAC used the lost spares, and during which KAC did not know whether they would be returned or not, from 9 August 1990 to 12 September 1992. The period amounts to 25 months and 3 days.

The additional user element adjustment to compensate KAC for this period of IAC’s user of the lost spares is calculated as follows: -

Interest on the additional ‘user’ element should run from the end of the notional lease period, namely 12 September 1992.

In Whitwham v. Westminster Brymbo Coal and Coke Company [1896] 2 Ch 538, the defendants had trespassed on the plaintiffs’ land by tipping spoil thereon from their colliery. The Court of Appeal held that the amount of damages for trespass was not to be assessed by ascertaining merely the diminution in value of the plaintifffs’ land, but that the principle of the way-leave cases applied. If one person without leave of another uses the other’s land for his own purposes he ought to pay for such user. As to so much of the land as was covered with spoil, the value of the land for the purpose for which it was used by the wrongdoers ought to be taken into account. As to the rest of the land, the measure of damages was the diminution of the value thereof to the plaintiffs by reason of the wrongful acts of the defendants.

Lindley LJ said (at pages 541-2): -

“… the defendants have done. …two things. They have, first of all, so used the plaintiffs' land as to diminish its value ... Mr. Russell admits that the defendants must pay that, but contends that they are to pay no more. That leaves out of sight what more the defendants have done. What they have done more is this - they have been using the land for years. Why are not the plaintiffs to be entitled to some compensation in respect ofthat user? The plaintiffs have been injured in two respects. First, they have had the value of their land diminished; secondly, they have lost the use of their land, and the defendants have had it for their own benefit. It is unjust to leave out of sight the use which the defendants have made of this land for their own purposes, and that lies at the bottom of what are called the way-leave cases. Those cases are based upon the principle that, if one person has without leave of another been using that other's land for his own purposes, he ought to pay for such user.”

In the Greta Holme [1897] AC 596 (a negligence case) owing to a collision with a ship (the ship being at fault) a steam dredger was damaged and the owners were deprived of the use of it for some weeks and the dredging works were delayed. The dredger belonged to trustees charged with the duty of maintaining a harbour and waterway, deriving their funds from rates and not entitled to distribute profits. The trustees brought a collision suit against the shipowners. The House of Lords held that though the trustees were not out of pocket in any definite sum, they were entitled to recover damages for the loss of the use of the dredger.

Lord Halsbury LC said (at page 601): -

“It is a sufficiently familiar head of damages between individuals that, if one person injures the property of another, damages may be recovered, not only for the amount which it may be necessary to spend in repairs, but also for the loss of the use of the article injured during the period that the repairing may occupy.”

The principles laid down in the Greta Holme were applied in the Mediana [1900] AC 113, another negligence case. A lightship, belonging to a harbour board was damaged in a collision caused by the negligence of the appellants. During repair the damaged lightship was replaced by another lightship belonging to the board and maintained at an annual expense for the purpose of such an emergency. The House of Lords held that the board was entitled to recover from the appellants not only the out of pocket expenses caused by the collision, but also substantial damages for the loss of the services of the damaged lightship during the time her place was taken by the substituted lightship.

Lord Halsbury LC said (at page 117): -

“What right has a wrongdoer to consider what use you are going to make of your vessel? More than one case has been put to illustrate this: for example, the owner of a horse, or of a chair. Supposing a person took away a chair out of my room and kept it for twelve months, could anybody say you had a right to diminish the damages by showing that I did not usually sit in that chair, or that there were plenty of other chairs in the room? The proposition so nakedly stated appears to me to be absurd; but a jury have very often a very difficult task to perform in ascertaining what should be the amount of damages of that sort. I know very well that as a matter of common sense what an arbitrator or a jury very often do is to take a perfectly artificial hypothesis and say, ‘Well, if you wanted to hire a chair, what would you have to give for it for the period’; and in that way they come to a rough sort of conclusion as to what damages ought to be paid for the unjust and unlawful withdrawal of it from the owner. Here, as I say, the broad principle seems to me to be quite independent of the particular use the plaintiffs were going to make of the thing that was taken, except … when you are endeavouring to establish the specific loss of profit, or of something that you otherwise would have got which the law recognises as special damage. In that case you must show it, and by precise evidence …. But when we are speaking of general damages no such principle applies at all, and the jury might give whatever they thought would be the proper equivalent for the unlawful withdrawal of the subject-matter then in question”.

In Strand Electric v. Brisford Entertainments [1952] 2 QB 246 the claimants claimed damages for the defendant’s wrongful detention of portable switchboards. In addition to an order for the return of the switchboards or their value, the claimants claimed damages for the period of the detention. The Court of Appeal held that in an action in detinue in respect of a chattel which the plaintiff, as part of his business, hires out to users, the plaintiff, if the defendant has during the period of detention made beneficial use of the chattel, is entitled to recover as damages the full market rate of hire for the period of detention.

Somervell LJ referred to the Greta Holme and the Mediana and said (at page 252): -

“This is a claim in detinue. … the defendants had for their own benefit the use of the plaintiffs' chattels. This is an incident which is not present in the damage by negligence cases. Why is not the plaintiffs' loss the value in the market of the user? The wrong is not the mere deprivation, as in negligence and possibly some detinue cases, but the user … if the chattel has been damaged and depreciated this may be an item in a claim for special damage. There are no doubt some cases in which a wrongdoer may be called on to account for profits, but in considering the measure of damages as raised here I think the actual benefit which the defendants have obtained is irrelevant. The damages could not, in my view, be increased by showing that a defendant had made by his use of the chattels much more than the market rate of hire. Equally they cannot be diminished by showing that he had made less.

It is curious … that there is no authority on this point. The nearest analogy is a claim for mesne profits. The measure there is a reasonable sum in the nature of rent for the user during the period of the defendant's trespass. ... The defendant must pay what the plaintiff would have obtained if the defendant had lawfully been in possession. In principle the same measure should … apply where a defendant has detained and used a chattel of the plaintiff which the plaintiff, as part of his business, hires out to users. I have added these latter words because I do not wish in this so far uncharted field to go beyond the facts of the case … It would appear … that the principle may be more widely applied in the United States of America and would cover, for example, detention and use of a private motor-car. I am not saying this is wrong. There may be no distinction in principle. The question had, however, better be left till it arises”.

Denning LJ said (at page 253): -

“The question in this case is: What is the proper measure of damages for the wrongful detention of goods? Does it fall within the general rule that the plaintiff only recovers for the loss he has suffered or within some other, and if so what, rule? It is strange that there is no authority upon this point in English law; but there is plenty on the analogous case of detention of land. The rule there is that a wrongdoer, who keeps the owner out of his land, must pay a fair rental value for it, even though the owner would not have been able to use it himself or to let it to anyone else. So also a wrongdoer who uses land for his ownpurposes without the owner's consent, as, for instance, for a fair ground, or as a wayleave, must pay a reasonable hire for it, even though he has done no damage to the land at all: Whitwham v. Westminster Brymbo Coal Company. I see no reason why the same principle should not apply to detention of goods.

If a wrongdoer has made use of goods for his own purposes, then he must pay a reasonable hire for them, even though the owner has in fact suffered no loss. It may be that the owner would not have used the goods himself, or that he had a substitute readily available, which he used without extra cost to himself. Nevertheless the owner is entitled to a reasonable hire. If the wrongdoer had asked the owner for permission to use the goods, the owner would be entitled to ask for a reasonable remuneration as the price of his permission. The wrongdoer cannot be better off because he did not ask permission. He cannot be better off by doing wrong than he would be by doing right. He must therefore pay a reasonable hire” (emphasis added).

Romer LJ said (at page 256): -

“The inquiry is: What loss has the plaintiff suffered by reason of the defendants’ wrongful act? In determining the answer to this inquiry the question of quantifying the profit or benefit which the defendant has derived from his wrongful act does not arise; for there is no necessary relation between the plaintiffs' loss and the defendants' gain. It follows that in assessing the plaintiffs' loss in the present case one is not troubled by any need to evaluate the actual benefit which resulted to the defendants by having the plaintiffs' equipment at their disposal.

… the only substantial reason put forward by the defendants why the plaintiffs should not receive the full hiring value of the equipment during the period of detention is that the plaintiffs might not have been able to finda hirer. In my judgment, however, a defendant who has wrongfully detained and profited from the property of someone else cannot avail himself of a hypothesis such as this. It does not lie in the mouth of such a defendant to suggest that the owner might not have found a hirer; for in using the property he showed that he wanted it and he cannot complain if it is assumed against him that he himself would have preferred to become the hirer rather than not have had the use of it at all. … it accordingly seems to me that the defendants are bound to pay the recognized hiring value for the property in question…

… I express no opinion as to what the plaintiffs’ rights would have been in the matter of damages had the property detained been of a non-profit earning character, or if, although profit-earning, the plaintiffs had never applied it to remunerative purposes.”

Swordheath Properties Ltd v. Tabet [1979] 1 WLR 285 was concerned with damages for trespass. Certain defendants wrongfully continued to occupy premises after the end of a lease.

Megaw LJ cited Whitwham and Penarth Dock Engineering Company v Pounds [1963] 1 Lloyd’s Rep 359 and said (at page 288): -

“It appears to me to be clear, both as a matter of principle and of authority, that in a case of this sort the plaintiff, when he has established that the defendant has remained on as a trespasser in residential property, is entitled, without bringing evidence that he could or would have let the property to someone else in the absence of the trespassing defendant, to have as damages for the trespass the value of the property as it would fairly be calculated; and, in the absence of anything special in the particular case it would be the ordinary letting value of the property that would determine the amount of the damages. In the present case, therefore, it appears to me that this appeal falls to be allowed and that the plaintiffs ought to have, not merely judgment for possession, but also damages for trespass for whatever would have been the appropriate amount … as being the proper letting value of the property from July 5, 1976, to the date of the judgment in the West London County Court”.

In Hillesden v Ryjack [1983] 1 WLR 959 Parker J referred to Strand Electric and (at page 963) said: -

“The action in that case was in detinue and not conversion, but there will in almost all cases of detinue have been an original act of conversion also and what was in effect held in that case was that, in the case of conversion of a profit earning chattel which a defendant has used for his own benefit, the owner can recover by way of damages a hire charge plus either the return of the chattel or, if there has been a subsequent conversion by disposal, the value of the chattel at the date of such conversion.”

In Stoke-on-Trent City Council v. Wass [1988] 1 WLR 1406 a company began to operate a Thursday market at Longton in 1982. The company did not have permission from the council, who operated statutory markets on Wednesdays, Fridays and Saturdays. In 1984 the council commenced a statutory market on Thursdays in Fenton, which was within about 7 miles of the company’s market at Longton. Despite attempts to prevent it, the company continued to hold a market at Longton. In 1986 the council issued a writ claiming an injunction restraining the company from holding a market and general damages, alleging that the council’s right to operate its market at Fenton was being infringed. Peter Gibson J held that a franchise market was entitled to protection against the levying of a rival same day market within 7 miles without proof of loss, but that it was for the council to prove that the company’s market had caused loss to their other day markets, and he granted a permanent injunction accordingly. He also found that the council had suffered no loss to the Thursday market, but held that they were nevertheless entitled to an award of damages calculated by reference to the licence fee that the council could reasonably have required for the operation of the company’s market between April 1984 and the grant of the permanent injunction at trial. The Court of Appeal held, allowing the appeal, that as a general rule in tort a plaintiff recovered damages equivalent to the loss he had suffered, and where he had suffered loss to his property or to some proprietary right he recovered damages equivalent to the diminution in value of the property or right; that, exceptionally, in cases of trespass to land, patent infringement and some cases of detinue and nuisance, the “user principle” applied to enable a plaintiff to recover as damages a reasonable sum for the wrongful use made of his property; that the owner of a market right was protected against disturbance in the enjoyment of his right by a remedy of damages equivalent to the diminution in value of the right by loss of stallage, and there was no reason to extend the user principle to cover infringement of a market right by the holding of an unauthorised market, where the plaintiff could not show that he had suffered loss by reason of the infringement. Accordingly, since the council had suffered no loss as a result of the company’s unauthorised market they were entitled to nominal damages only.

Nicholls LJ said (at page 1416):-

“It is an established principle concerning the assessment of damages that a person who has wrongfully used another's property without causing the latter any pecuniary loss may still be liable to that other for more than nominal damages. In general, he is liable to pay, as damages, a reasonable sum for the wrongful use he has made of the other’s property. The law has reached this conclusion by giving to the concept of loss or damage in such a case a wider meaning than merely financial loss calculated by comparing the property owner's financial position after the wrongdoing with what it would have been had the wrongdoing never occurred. Furthermore, in such a case it is no answer for the wrongdoer to show that the property owner would probably not have used the property himself had the wrongdoer not done so. In the Mediana … Earl of Halsbury L.C. made the famous observation that a defendant who had deprived the plaintiff of one of the chairs in his room for 12 months could not diminish the damages by showing that the plaintiff did not usually sit upon that chair or that there were plenty of other chairs in the room”.

In IBL Ltd v. Coussens [1991] 2 All ER 133 a company provided cars for its employee. The company dismissed the employee and in February 1988 requested the delivery of the cars and damages for breach of contract/conversion. The Court of Appeal held that damages awarded under s 3 of the 1977 Act for conversion as an alternative to the return of the goods were not to be arbitrarily assessed as at either the date of the conversion or the date of judgment but ought to be such as fairly compensated the owner for the loss of the goods, taking into account such matters as whether the owner would have kept the goods if they had not been converted if not, when he would have sold or replaced them, if they were kept, whether they had increased in value, and whether the owner had suffered damage for loss of use. The appeal was allowed and the matter remitted to the master for damages to be assessed by reference to the value of the cars at such date as would fairly compensate the company for its loss, such assessment to be made in the light of further evidence if need be as to the value of the cars and what the company would have done with them if they had been returned in February 1988.

Ministry of Defence v. Ashman (1993) 25 HLR 513 was concerned with damages for trespass. The first defendant’s husband moved out of service quarters leaving the first defendant and their children in possession. The first defendant did not move out as she had no alternative accommodation to which to go. The issue was as to the measure of the mesne profits to which the plaintiffs were entitled. The Court of Appeal held that where the property was not normally let on the open market, and the trespasser only remained in possession because she was in no position to move anywhere else, more assistance as to the proper value to the first defendant of the use of the property might have been gained by looking at what she would have had to pay for suitable local authority accommodation, than by focusing on evidence given on behalf of the plaintiffs as to market rent. Accordingly, the damages should be re-assessed on that basis.

Kennedy LJ said (at page 518): -

“damages in the Penarth Dock case were calculated by reference to the “proper value to the trespassers of use of the property. In … Swordheath … the Court of Appeal was able to apply that approach, which may be somewhat analogous to quasi-contractual restitution, to a claim by a landlord against, occupants of residential property who had remained in unlawful possession. The landlord was held entitled to recover “the proper letting value of the property” for the relevant period, that being in an ordinary case, in a free market, the value to the trespassers of its use. But where, as in the present case, the property is not normally let on the open market, and the trespasser only remains in possession because she is no position to move anywhere else … more assistance as to the proper value to Mrs Ashman of the use of the property might be gained by looking at what she would have had to pay for suitable local authority accommodation, had any been available, than by focusing on evidence given on behalf of the Ministry as to market rent.”

Hoffmann LJ said (at page 519) that the Ministry of Defence elected for a restitutionary remedy. “All that matters is the value of benefit which the defendant has received”. He added: -

“The open market value will ordinarily be appropriate because the defendant has chosen to stay in the premises rather than pay for equivalent premises somewhere else. But such benefits may in special circumstances be subject to what Professor Birks … has … called subjective devaluation. This means a benefit may not be worth as much to the particular defendant as to someone else. In particular, it may be worth less to a defendantwho has not been free to reject it…”

Lloyd LJ said at page 521: -

“… it is very doubtful, as the law now stands, whether the restitutionary remedy is available in the case of wrongful occupation of land. … What then is the measure of damages in a claim for mesne profits? In the vast majority of cases it will be at the same rate as the previous rent …. Presumably if the market has fallen, [the landlord] will recover less. I see no difficulty in the landlord recovering damages at the market rate even though he has adduced no evidence that he would or could have relet the property. That is, as was held in Swordheath Properties, the appropriate measure of damages in the normal case. But the question still remains whether the present case is indeed normal … I am content to go along with the basis proposed by Kennedy LJ, that the damages should be based on the value of the benefit to Mrs Ashman. It may be that in the end will not make much difference in terms of money.”

In Inverugie v. Hackett [1995] 3 All ER 841 the plaintiff purchased in 1970 the long leasehold of 30 of the 164 apartments in a hotel in The Bahamas. The plaintiff’s apartments continued to be managed on the plaintiff’s behalf as an integral part of the hotel. In 1974 the owners of the hotel ejected the plaintiff, who successfully brought proceedings for possession. However, the owners did not give up possession until 1990 by which time the period of their trespass had continued for a period of 15 ½ years. During that period the hotel had an occupancy rate of about 35% and was running at a loss. The plaintiff claimed mesne profits for that period. The registrar awarded damages being 12 ½ % simple interest on the original investment over the whole period of 15 ½ years. The plaintiff appealed and the owners cross-appealed to the Court of Appeal of the Bahamas. The majority calculated the mesne profits on the basis of the notional gross revenue of the 30 apartments at 100% occupancy over the period of the trespass, less 3 ½ months when the apartments would have been unoccupied for refurbishing, a proportion of the total expenses relating to the 30 apartments and ground rent. The other member of the court held that the damages should be based on what the plaintiff was entitled to receive for the owner’s use and physical possession of the apartments, irrespective of whether the owners wished or were able to rent them. The owners appealed to the Privy Council, contending that damages had to be assessed for the 30 apartments as a whole and taking into consideration the fact that the hotel had an occupancy rate of only 35%. The Privy Council held that a person who let out goods on hire or the landlord of residential property was entitled to recover damages from a trespasser who wrongfully used his property irrespective of whether or not he could show that he would have let the property to anybody else and whether or not he would have used the property himself. Although the plaintiff might not have suffered any actual loss by being deprived of the use of his property, he was entitled to recover a reasonable rent for the wrongful use of his property by the trespasser, and similarly, although the trespasser might not have derived any actual benefit from the use of the property, he was obliged to pay a reasonable rent for the use he enjoyed. Applying that principle, the hotel owners had to pay the going rate for each apartment for 365 days of the year, even though in the event they had derived no benefit from the use of the plaintiff’s apartments. On the facts, a reasonable rental value for the 30 apartments was the published rate less 35% in the winter and 65% in the summer, that being the ‘wholesale’ rate paid by tour operators, and since any award based on that rate came to well in excess of the amount awarded by the majority of the Court of Appeal, the appeal would be dismissed.

Lord Lloyd said (at page 845): -

“The cases … establish, beyond any doubt, that a person who lets out goods on hire, or the landlord of residential property, can recover damages from a trespasser who has wrongfully used his property whether or not he can show that he would have let the property to anybody else, and whether or not he would have used the property himself … It is sometimes said that these cases are an exception to the rule that damages in tort are compensatory. But this is not necessarily so. It depends how widely one defines the ‘loss’ which the plaintiff has suffered. As the Earl of Halsbury LC pointed out in the Mediana, it is no answer for a wrongdoer who has deprived the plaintiff of his chair to point out that he does not usually sit in it or that he has plenty of other chairs in the room. In Stoke-on-Trent City Council v W & J Wass Ltd Nicholls LJ called the underlying principle in these cases the ‘user principle’. The plaintiff may not have suffered anyactual loss by being deprived of the use of his property. But under the user principle he is entitled to recover a reasonable rent for the wrongful use of his property by the trespasser. Similarly, the trespasser may not have derived anyactual benefit from the use of the property. But under the user principle he is obliged to pay a reasonable rent for the use which he has enjoyed. The principle need not be characterised as exclusively compensatory, or exclusively restitutionary; it combines elements of both … If a man hires a concrete mixer, he must pay the daily hire, even though he may not in the event have been able to use the mixer because of rain. So also must a trespasser who takes the mixer without the owner’s consent. He must pay the going rate, even though in the event he has derived no benefit from the use of the mixer. It makes no difference whether the trespasser is a professional builder or a do-it-yourself enthusiast.”

In A-G v Blake [2001] AC 268, at pages 278-280, Lord Nicholls said: -

“The general rule is that … the measure of damages is to be, as far as possible, that amount of money which will put the injured party in the same position he would have been in had he not sustained the wrong … Damages are measured by the plaintiff's loss, not the defendant's gain. But the common law, pragmatic as ever, has long recognised that there are many commonplace situations where a strict application of this principle would not do justice between the parties. Then compensation for the wrong done to the plaintiff is measured by a different yardstick. A trespasser who enters another's land may cause the landowner no financial loss. In such a case damages are measured by the benefit received by the trespasser, namely, by his use of the land. The same principle is applied where the wrong consists of use of another’s land for depositing waste, or by using a path across the land or using passages in an underground mine. In this type of case the damages recoverable will be, in short, the price a reasonable person would pay for the right of user: see Whitwham v Westminster Brymbo Coal and Coke Co and the “wayleave” cases …

The same principle is applied to the wrongful detention of goods. An instance is the … decision of the Court of Appeal in Strand Electric, concerning portable switchboards. But the principle has a distinguished ancestry. The Earl of Halsbury LC famously asked in the Mediana, that if a person took away a chair from his room and kept it for 12 months, could anybody say you had a right to diminish the damages by showing that I did not usually sit in that chair, or that there were plenty of other chairs in the room?” …

To the same effect was Lord Shaw’s telling example in Watson, Laidlaw & Co Ltd v Pott, Cassels and Williamson [1914] 31 RPC 104, 119. It bears repetition:

“If A, being a liveryman, keeps his horse standing idle in the stable, and B, against his wish or without his knowledge, rides or drives it out, it is no answer to A for B to say: ‘Against what loss do you want to be restored? I restore the horse. There is no loss. The horse is none the worse, it is the better for the exercise.’

Lord Shaw prefaced this observation with a statement of general principle: -

wherever an abstraction or invasion of property has occurred, then, unless such abstraction or invasion were to be sanctioned by law, the law ought to yield a recompense under the category or principle … either of price or of hire. That was a patent infringement case. The House of Lords held that damages should be assessed on the footing of a royalty for every infringing article. This principle is established and not controversial. More difficult is the alignment of this measure of damages within the basic compensatory measure. Recently there has been a move towards applying the label of restitution to awards of this character: see, for instance, Ministry of Defence v Ashman and Ministry of Defence v Thompson [1993] 2 EGLR 107. However that may be,

these awards cannot be regarded as conforming to the strictly compensatory measure of damage for the injured person’s loss unless loss is given a strained and artificial meaning. The reality is that the injured person’s rights were invaded but, in financial terms, he suffered no loss. Nevertheless the common law has found a means to award him a sensibly calculated amount of money. Such awards are probably best regarded as an exception to the general rule”.

In the Main Aircraft Action, Lord Nicholls again referred to the user principle at paragraphs 87-90. In particular, he said:

“Sometimes, when the goods or their equivalent are returned, the owner suffers no financial loss. But the wrongdoer may well have benefited from his temporary use of the owner’s goods. It would not be right that he should be able to keep this benefit. The court may order him to pay damages assessed by reference to the value of the benefit he derived from his wrongdoing. I considered this principle in A-G v Blake. In an appropriate case the court may award damages on this ‘user principle’ in addition to compensation for loss suffered. For instance, if the goods are returned damaged, the court may award damages assessed by reference to the benefit obtained by the wrongdoer as well as the cost of repair”.

The principles laid down in Blake were applied by Mance LJ in Experience Hendrix v PPX Enterprises [2003] EWCA Civ, 323. In paragraph 26 of his judgment he said: -

“…Another situation where damages do not necessarily depend upon precisely what would have occurred but for the wrong is where there has been a conversion: cf. Kuwait Airways Corpn v Iraqi Airways Co, especially at paras 82-83. In a case such as Wrotham Park the law gives effect to the instinctive reaction that, whether or not the appellant would have been better off if the wrong had not been committed, the wrongdoer ought not to gain an advantage for free, and should make some reasonable recompense. In such a context it is natural to pay regard to any profit made by the wrongdoer (although a wrongdoer surely cannot always rely on avoiding having to make reasonable recompense by showing that despite his wrong he failed, perhaps simply due to his own incompetence, to make any profit). The law can in such cases act either by ordering payment over of a percentage of any profit or, in some cases, by taking the cost which the wrongdoer would have had to incur to obtain (if feasible) equivalent benefit from another source.”

Text - books.

McGregor on Damages, 17^th edition, at paragraph 12-008 states that: -

“In the proprietary torts where restitutionary damages have flourished except in name, the courts have attempted to rationalise the damages awarded as compensatory on the basis of what is today generally referred to as the user principle, a phrase employed, and possibly initiated, by Nicholls LJ … in Stoke City Council v W & J Wass. The law has considered that a person should have a claim against one who has used his property without his consent, a claim to be measured by the amount which could reasonably be required to gain permission for the property’s use, and has regarded the claimant as suffering loss or damage by virtue of not having received that amount.”

Butterworths’ The Law of Restitution contains a useful analysis of the user principle in paragraphs 12.34 to 12.57. In particular: -

“The user principle

Another exception to the rule that damages in tort are measured solely by the claimant’s loss, an exception described by Lord Nicholls in A-G v Blake as ‘pragmatic’, is the ‘user principle’. Where a trespasser enters another’s land, it may cause the landowner no measureable financial loss. Nevertheless, damages can be awarded to represent an amount due to the landowner for using the claimant’s land. Similarly, using the claimant’s land as a waste dump, or as a path, or in the form of underground passage-ways, also give rise to an obligation to pay damages based on the same ‘user principle’. The amount due is the price a reasonable person would pay for the relevant use. The same principle has been used in cases of the wrongful detention of goods and, beyond tort law, has also been used in analogous cases concerning confidential information and breaches of covenants. It also analogous to the way in which damages are calculated in some intellectual property cases.

… if the law did not recognise the user principle, the defendant would have appropriated the claimant’s property with impunity. The user principle therefore protects property rights in themselves. The claimant’s property right is protected not because of what the claimant might or could have done with the property, but because the claimant had the right to exclude others from using the property at the claimant’s own discretion. The concept of property protected by the user principle is one in which what is important is the owner’s exclusion of others from use and the owner’s discretion to use or not to use, rather than the owner’s enjoyment of the use. The defendant’s wrong consists of disregarding the claimant’s right to exclude. The damages recognise the nature of the wrong.

The precise amount to be paid under the user principle has caused controversy. The starting point is that the defendant must pay a ‘reasonable rent’ or a ‘reasonable fee’. The claimant is not bound to show that he has suffered an actual loss, and is not therefore bound to show that he would otherwise have rented or hired out the property concerned, or even have used the property for any valuable purpose.

The measure is … not purely compensatory. On the other hand, the measure is also not an account of profits. It is no answer for the defendant that he has, in the event, failed to make any profit from his tort. The measure is hence not fully restitutionary either. In Inverugie Investments Ltd v Hackett, the Privy Council said: ‘The principle need not be characterised as exclusively compensatory, or exclusively restitutionary; it combines elements of both’. It might even be more accurate to say that it stands apart from both.

The user principle has been considered in a number of Commonwealth cases which refer to many of the English authorities cited above. See Roberts v. Rodney DC [2001] NZLR 402 Barker J; and Finesky Holdings Pty Ltd v. Minister of Transport for Western Australia [2002] WASCA 206, the Supreme Court of Western Australia.

The relevant legal principles as to user damages are as follows.

I do not consider that KAC’s claim to user damages is incompatible with KAC’s claims in the Main Aircraft Action for the reasons advanced by KAC. The factual basis for the loss of profits claim in respect of AHI was that KAC would have leased it out on its own, under a dry lease. Thus there was no requirement for KAC to use any spares to maintain AHI.

IAC’s points about PIPs and interest are taken into account below.

As to IAC’s submissions that user damages should not exceed the value of the actual benefit to IAC and that user damages should not exceed the value of the goods with interest, the relevant legal principles are as set out above.

As to IAC’s submissions that KAC’s claim for diminution in value at the end of the notional lease period should not exceed the repair costs actually incurred, I have taken into account the need to ensure that there is no element of double recovery.

The order of 15 June 2004 (whereby I granted KAC permission to re-re-re-re-amend the Points of Claim) on terms provided as follows: -

“2.

Permission to amend is granted subject to KAC not being entitled to seek or obtain by way of user damages an amount which, together with interest, is more than: -

(1)

The Valuation Amount (as defined in the Draft Pleading) for the Spares on 9 August 1990; plus

(2)

The amounts pleaded under the heading “Consequential Damages” in the Draft Pleading; and

(3)

Interest on those sums from 9 August 1990.

3.

KAC is only permitted to rely on the factual allegations made in paragraphs 6 (b a) and 6 (b b) of the Draft Pleading. For the avoidance of doubt, KAC is to be confined to the contention that user is sufficiently established by showing that the Spares were all incorporated as part of the defendant’s total stock for use as and when required. KAC will not allege that its user claim is dependent on the extent of drawdown from stock.

4.

Further, for the avoidance of doubt, KAC does not allege for the purposes of its claim for user damages, that:

(1)

There were any flights by IAC between August 1990 and 17 January 1991 save for flights within Iraq and/or to adjoining Arab states; or

(2)

Any flights by IAC between 17 January 1991 and 12 September 1992 save on very limited occasions, and largely on routes within Iraq, because of the “no fly zone”.”

Any award of damages under this head of claim must have regard to the limitations in the order of 15 June.

When giving evidence Mr Sturrock put forward revised lease rates (% of MLP per calendar month) applicable to the aircraft types in 1990 to generate a 20% margin as follows:

Mr Sturrock said that a reasonable lessor would expect a reasonable profit margin of 20%.

As to the IAC rate, Mr Sturrock accepted that commercially there would never have been such a rate (“I have never actually been asked to lease parts to a company at war”.) A rate which would never have been applied between commercial parties is not, in my view, a reasonable rate. Further there would be problems of overlap with the claim for value damages, if the IAC rate were taken.

As to the Airbus/Boeing rates for non-factory new items (the rates in the second and third columns) Mr Vos fairly accepted that Mr Sturrock included an element for depreciation “which … could be argued against [KAC] is also some kind of value figure.” Appropriate allowance must be made for this, to ensure that there is no element of double recovery.

As to remaindered spares, KAC accepts that IAC’s use must have come to an end when IAC ceased to have control of KIA in anticipation of the Gulf War. The war commenced on 17 January 1991. The documents show that as at 29 December 1990 instructions were been given to bring over “all technical books relating to the (Airbus) aircraft which are currently in the technical library in the Kuwait province”. KAC’s claim is in respect of the period 9 August 1990 to 31 December 1990 and this seems reasonable. To award value damages (80-48=32% MLP) plus interest from 31 December 1990, plus repair costs and interest thereon from 31 December 1992 (the average date repair costs were incurred) would leave KAC uncompensated for the period during which IAC had the use of the remaindered spares – from 9 August 1990 to 31 December 1990. This period amounts to 4 months and 22 days.

I consider that applying the principles set out above, a just remedy in all the circumstances is to award KAC 2.5% MLP per month for this period, plus interest from 31 December 1990. In addition KAC will recover 32% MLP plus interest from 31 December 1990 and repair costs and interest thereon from 31 December 1992. KAC accepts that the claim in respect of PIPs referable to remaindered spares falls away.

As to recovered spares, the recovered spares were returned by IAC in tranches on 23 January 1992, 19 March 1992, 19-21 May 1992 and 12 September 1992. KAC suggests that 20 May 1992 is taken as a reasonable mid-point between 20 January 1992 and 12 September 1992. This seems reasonable. To award value damages (80-48=32% MLP) plus interest from 20 May 1992, plus repair costs and interest thereon from 31 December 1992, would leave KAC uncompensated for the period during which IAC had the use of the recovered spares – from 9 August 1990 to 20 May 1992, a period of 21 months and 11 days.

I consider that applying the principles set out above, a just remedy in all the circumstances is to award KAC 1.25% MLP per month for this period, plus interest from 20 May 1992. In addition KAC will recover 32% MLP plus interest from 20 May 1992 and repair costs and interest thereon from 31 December 1992. KAC accepts that the claim in respect of PIPs referable to remaindered spares falls away.

In arriving at the percentages of 2.5% and 1.25% per month set out above, I have in particular (but without limitation) had regard to: -

The percentages of 2.5% and 1.25% MLP per month are intended to represent just compensation to KAC in respect of the periods of 4 months and 22 days and 21 months and 11 days. I prefer to regard this award as just compensation drawing on the user principle, rather than an award of user damages as such.

As to lost spares, I consider that to award value damages (80% MLP) plus interest from 9 August 1990, plus PIPs referable to lost spares and interest from the date of purchase, is a just remedy in all the circumstances. It is true that IAC has had the use of the lost spares, but on this approach KAC recovers the market value of the goods at the time IAC converted them plus interest from that date.

The facts and circumstances of the present case are unique. In attempting to award just compensation it is not easy to strike the appropriate balance between awards of damages in respect of remaindered, recovered and lost spares. If in attempting to strike the appropriate balance between awards of damages in respect of remaindered, recovered and lost spares I have (contrary to my view) over-compensated KAC in respect in one head of claim and under-compensated KAC in respect of another head of claim, regard should be had to this when standing back and considering the overall award.

Further it should be recorded that in a number of instances KAC/Mr Campbell have, where there is an area of uncertainty or for other reasons, adopted an approach which favours IAC.

Mr Campbell has prepared calculations to reflect the answers given above to the List of Issues. Mr Campbell’s calculations have been checked and agreed by Mr Villa and Grant Thornton on behalf of IAC. I am very grateful to Mr Campbell, Mr Villa and Grant Thornton for their assistance in this connection.

I refer to Mr Campbell’s affidavit sworn on 11 November 04 which explains his General Approach, Amendments to AFC 3 to produce AFC 4, the Final Quantum Model, and Proof of Totals to the Working Schedule.

The Final Cap (see paragraph 2 of the order of 15 June 2004) including principal and interest is $365,825,649. No restriction of the Final Quantum is required.

The Final Quantum of KAC’s claim, calculated by reference to AFC 3 as amended for the issues agreed between the parties or between Mr Villa and Mr Campbell and applying the answers set out in this judgment, is:

I give judgment accordingly.