Aercap Ireland Limited v AIG Europe SA & Anor

This is an application by the Applicant, Fidelis Insurance Ireland DAC (‘Fidelis’) to be joined as the Third Defendant to these proceedings, and for consequential directions to be given.

At the conclusion of the hearing on 13 January 2023, I told the parties that the application to join would be granted, and that I would give reasons for that decision in due course. These are those reasons.

The background may, in large part, be taken from the Claimant’s (‘AerCap’s’) Skeleton Argument, and, as far as material, is as follows. This summary is not intended to be contentious or to decide any matter which may be in dispute between the parties.

Following the Russian invasion of Ukraine, the EU, and subsequently the UK, imposed sanctions prohibiting AerCap and other related lessors (collectively the ‘Insureds’) from continuing the leasing of aircraft and aircraft parts to Russian airlines, with effect from 28 March 2022. Between 2 and 9 March 2022, notices were issued by AerCap and its related lessor entities to their Russian lessees, terminating the leasing of all aircraft and engines which had been on lease to them, and requiring those lessees to return the assets to specified locations. In the majority of cases the lessees declined to do so.

The Defendants are the insurers under Section One (‘All Risks’) and Section Three (‘War Risks’) of the Insureds’ aircraft hull, spares and equipment policy for the period 1 November 2021 to 31 October 2022 (‘the Policy’).

On 10 March 2022 AerCap wrote to its insurers under Section One and Section Three of the Policy notifying them of what was said to be the ‘happening of an event likely to give rise to a claim.’ On 24 March 2022 AerCap submitted a claim to those insurers seeking an indemnity of nearly US$3.5 billion in respect of what was said to be a total loss of 116 aircraft and 23 engines which had not been returned by lessees contrary to AerCap’s request. AerCap advanced its claim principally under Section One, with an alternative claim under Section Three.

The insurers did not accept AerCap’s claims. AerCap proceeded to issue the present proceedings on 9 June 2022. The claim is advanced against Section One insurers in the amount of some US$3.5 billion. The alternative claim against Section Three insurers is, as is common ground, capped at the Section Three aggregate limit of US$1.2 billion.

The way in which AerCap advanced its claim, in its Claim Form, was as a representative action, whereby the First Defendant (‘AIG’) was sued as a representative on its own behalf and on behalf of the Section One insurers; and the Second Defendant (‘LIC’) was sued as a representative on its own behalf and on behalf of the Section Three insurers.

Fidelis is one of a number of insurers which subscribed to both Section One and Section Three of the Policy. On 22 August 2022, shortly before the First and Second Defendants served their defences, solicitors instructed on behalf of Fidelis wrote to the parties seeking their consent to Fidelis being joined to the action. As, in the event, neither the First Defendant nor AerCap consented to the joinder, Fidelis issued the present application on 22 September 2022.

Fidelis’s application is brought primarily under CPR r. 19.2. This provides, in part, as follows:

It is also germane to refer to the terms of CPR r. 19.6. It provides in part:

Fidelis’s contentions may be summarised as follows:

The position of the other parties may be summarised as follows:

An authority which is of assistance in the present context, which was cited by Mr Kendrick KC, is PNPF Trust Co Ltd v Taylor [2009] EWHC 1693 (Ch). In that case, the court was required to determine an application for the joining of a participating body of a pension scheme (Teesport) as a separate defendant in proceedings brought by the claimant trustee of the scheme (PNPF) against the defendant members and bodies of the scheme, and an application for representation orders. The pension scheme, which had several participating bodies and members, was in substantial deficit, and PNPF had brought proceedings under CPR Pt 8 to determine the scope of its powers and identify which parties could be liable to contribute further. It was proposed that, under an interest/issue-based representation structure, the relevant issues would be divided up and allocated to particular members who would each act as representative defendants for other members. Each represented member would be able to introduce input in consultation with the other defendants and could require its defendant representative, with whom it had a community of interest, to take any point that was reasonably arguable. Teesport claimed that its potential liability to make further significant contributions under the scheme was extremely high and it therefore applied to be added as a separate defendant, represented at trial by its own independent legal advisers. That application was contested by PNPF and by another defendant. PNPF instead sought representation orders which, if granted, would result in Teesport being represented by up to four other defendants.

Proudman J permitted PNPF to be joined to the proceedings. At paragraphs 37-38 of her judgment she referred to a part of the history and justification for representative proceedings. She said:

At paragraph 47 Proudman J noted that it was not necessary that a party should consent to being represented. She said:

At paragraph 64 Proudman J said:

The objections to Teesport being separately represented included concerns as to potential delays, increased costs and duplication of arguments. Notwithstanding these matters, Proudman J considered that the interest in allowing Teesport to conduct its own case outweighed those concerns. At paragraphs 108 - 110 she said:

As I indicated at the conclusion of the hearing, in my judgment Fidelis’s application to be joined should succeed. I agree with Proudman J’s statement, in PNPF, that the essential purpose of representative proceedings is to include, not to exclude, and is not to shut out someone who is ready and willing to appear to represent his own interests at his risk as to costs. In my judgment, where a party has a direct and significant financial interest in the litigation such as Fidelis’s interest here, then, exceptional circumstances apart, if that party wishes to conduct his own defence at his own risk as to costs he should ordinarily be allowed to be joined to the proceedings and not be represented against his will.

In the present case, there is no doubt that Fidelis faces a very significant potential liability: it has a line of 2.75% on Section One and of 20% on Section Three. Fidelis is prepared to accept that, if joined, a judgment would be enforceable against it without the Court’s permission, and that it would be liable for its own costs if it lost (rather than the representative being liable for costs). There are no exceptional circumstances, as demonstrated by the fact that the other actions involving similar claims have been structured so that all insurers are joined. In those circumstances I have no doubt that the fair and appropriate course is to allow Fidelis to be joined.

The objections made by AIG to permitting Fidelis to be joined, in my judgment lacked force.

One such objection, as I understood it, was that Fidelis had not applied under the correct rule, in that it had applied under CPR 19.2 for joinder, rather than under CPR 19.6 for an order that it should not be represented by AIG. I do not accept that an application for joinder under CPR 19.2 was incorrect. In any event, Mr Kendrick KC made it clear that Fidelis was applying, to the extent necessary, under CPR 19.6. Given that there can be no doubt that the parties were in a position to deal with the question of whether AIG and LIC should continue as representatives of Fidelis, the point was, at best, a technical one without underlying substance.

A further objection was to the effect that, in order for there to be an order for joinder under CPR 19.2, Fidelis had to demonstrate either that it could ‘assist the court’ in resolving all matters in dispute (for the purposes of CPR 19.2(2)(a)) or that there is an issue between Fidelis and an existing party which Fidelis’s joinder would assist to resolve (for the purposes of CPR 19.2(2)(b)), and that Fidelis could satisfy neither. In my judgment, the conditions of both CPR 19.2(2)(a) and (b) are met. Fidelis can ‘assist the court to resolve all matters in dispute’, by participating in the proceedings, and ensuring that its position, in relation to a significant claim made against it, is put before the court, and it is desirable to add it to achieve that end, rather than have it unwillingly represented by other parties. Further there are issues between Fidelis and AerCap and, because a significant claim is made against it and it does not wish to be represented by other parties, it is desirable for Fidelis to be added as a party so that the court can resolve those issues.

I do not consider that it is necessary for Fidelis to show, at the stage of seeking joinder, that its position will not be adequately put forward by the representative parties. I consider that it is sufficient that Fidelis has a bona fide desire ‘to conduct its own case with its own lawyers who have only its own interests at heart’. I see no basis for doubting that Fidelis does have such a bona fide desire. Nor, if relevant, can it be said to be irrational. For one thing, parties’ positions, and also the nuances of how cases are presented, may change during the course of proceedings. Secondly, as Proudman J said in PNPF, there are typically difficulties for both a representative (and its lawyers) and for the person represented where that person is unwilling to be represented. It is clear that there are such difficulties in this case, in that AIG’s solicitors have recognised that they are unable to represent Fidelis, and are not sharing privileged documents with Fidelis. Thirdly, I accept that Fidelis has legitimate concerns about the allegations of bad faith made against related companies in proceedings in the USA arising from the position taken by insurers in this action.

Mr Kealey KC, for AIG, sought to argue, by reference to LB Holdings Intermediate 2 Ltd (In Administration) v Lehman Brothers Holdings Scottish LP 3 and Others [2018] EWHC 2017 (Ch), that the correct approach was to ask whether Fidelis could show that it ‘can, or might with sufficient certainty, be able to bring something to the party without at the same time imposing any unnecessary, unfair or disproportionate burdens on the other parties to the proceedings’ (to quote from para. 11 of Mann J’s judgment), and that as Fidelis could not show that, the court should refuse the application for joinder. LB Holdings involved a significantly different situation from the present. Neither of the parties seeking to be joined was in a position analogous to Fidelis’s here, in which the claimant is already seeking a binding determination that it is contractually liable for very substantial sums. In a case such as the present, I do not consider that a test of what the party seeking joinder can or might be able ‘to bring to the party’ is apt. If it is, what a party in a position such as Fidelis’s may ‘bring to the party’ is not to be judged exclusively or even mainly by whether it will in the event put forward arguments which are not advanced by someone else. Further, and in any event, I consider that Fidelis has a ‘sufficiently different and differentiated “perspective”, and a vigour’ (to quote from para. 15 of Mann J’s judgment) to make it appropriate to join it to the proceedings. As Fidelis says, it wishes to take a consistent approach throughout all the litigation in which it is involved, and not (whether as represented party or otherwise) to put forward an argument that the War Risks exclusion to Section One is applicable.

Mr Kealey KC further argued that Fidelis’s joinder was undesirable because it might lead to other insurers seeking to be separately represented. I considered that this point lacked conviction. No other insurer has yet sought to be separately represented, notwithstanding that (1) full defences have now been provided by both representatives, and (2) Fidelis’s position has been known for a considerable time and its joinder application was issued last September. In any event, even if other insurers did apply to be joined, the result at ‘worst’ (to adopt a viewpoint suggested by AIG’s submissions), would be that the present action came to be constituted in the same way as the other actions involving similar claims, to which I have referred, are constituted.

Mr Kealey KC also urged that AIG was concerned about ‘inequality of arms’ and about the addition of a further party (in addition to LIC) arguing against the application of the War Risks exclusion. I was unable to attach any weight to this argument. As I said at the hearing, and as I return to below, the court will be astute to ensure that there is no unnecessary duplication of argument or evidence. Furthermore, and in any event, the fact that an argument is supported by more than one party, even if it is put forward by more than one advocate, will not add to its cogency.

As I have already said, the court will not permit there to be unnecessary duplication of evidence or argument, and it will be astute to ensure that the joinder of Fidelis does not impose unnecessary costs on other parties. The directions which will be given in the case will seek to ensure that these objectives are met.

For the reasons I have given, Fidelis’s application to be joined is granted. Further directions as to its participation, if not agreed, will need to be made by the court, either on a separate application, or failing that at the forthcoming CMC.