Aercap Partners 1 Ltd v Avia Asset Management AB [2010] EWHC 2431 (Comm) (07 October 2010)

Neutral Citation Number: [2010] EWHC 2431 (Comm) Case No: 2009/706 IN THE HIGH COURT OF JUSTICE QUEEN'S BENCH DIVISION COMMERCIAL COURT Royal Courts of Justice Strand, London, WC2A 2LL 07/10/2010 B e f o r e : LORD JUSTICE GROSS ____________________ Between: Aercap Partners 1 Limited Claimant - and - Avia Asset Management AB Defendant ____________________ Akhil Shah QC (instructed by Simmons & Simmons) for the Claimant Stuart Adair (instructed by Trowers & Hamlins) for the Defendant Hearing dates: 24th, 25th, 26th, 27th, 28th May 2010 ____________________ HTML VERSION OF JUDGMENT ____________________ Crown Copyright © Lord Justice Gross : INTRODUCTION By an Aircraft Sale and Purchase Agreement dated 17 th October, 2008 ("the Agreement"), the Claimant ("AerCap") agreed to sell and the Defendant ("Avia") agreed to buy, two Boeing 757-200 aircraft with manufacturers' serial numbers 26963 and 26964 ("Aircraft 1" and "Aircraft 2" respectively and, collectively, "the Aircraft"), for a price of US$15.4 million each, subject to contractual adjustment under the Agreement and on the further terms and conditions therein set out. It is common ground that, apart from two deposit payments (of which more presently), the purchase price was not paid and the Aircraft were not delivered by AerCap to Avia. AerCap contends that Avia was in repudiatory and/or renunciatory breach of contract and claims damages under various heads of loss. Avia denies that AerCap was entitled to treat the Agreement as terminated by reason of any breach of contract on its part and instead contends that AerCap was itself in repudiatory breach of contract. By way of counterclaim, Avia seeks the return of the two deposit payments. If wrong on liability, Avia vigorously disputes quantum on a number of grounds. AerCap is a wholly owned subsidiary of AerCap Partners I Holdings Limited, itself a joint venture between AerCap N. V. and Lantana Aircraft Leasing Limited. AerCap N. V. has been described in the evidence as an integrated aviation company, with its headquarters in the Netherlands and offices in Ireland, the US, UK, China and Singapore. It apparently has a leading market position in aircraft and engine leasing, trading and parts sales, with a portfolio of approximately 291 aircraft and 92 engines, owned, on order, under contract or letter of intent, or managed. Lantana Aircraft Leasing Limited is one of the Deucalion Aviation Funds managed by DVB Bank, through which DVB Bank established the joint venture with the AerCap group of companies, in order to acquire a fleet of aircraft, including the Aircraft, the subject of the present dispute. Avia is a company incorporated in Lithuania. On the evidence, it appears to be an asset management company, principally owning and leasing aircraft. It is a subsidiary of the FlyLAL group, which formerly operated the FlyLAL airline ("FlyLAL") – an airline which ceased to operate on 17 th January, 2009 and has gone into liquidation. I turn at once to a bird's eye outline of the history – much of which is common ground. Under the Agreement, three deposits were payable in advance of delivery into an escrow account, with the balance of the purchase price payable on or before delivery. The first and second deposits were paid but the third, in the amount of US$300,000 (for both aircraft) and payable on the 5 th January, 2009, was not. It is not in dispute that Avia's failure to pay the third deposit constituted a breach of the Agreement and, subject only to the remaining matters in dispute, would have entitled AerCap to treat the Agreement as terminated. Discussions commenced, concerning Avia taking the Aircraft pursuant to a finance lease, as an alternative to the Agreement. On the 21 st January, 2009, the parties' representatives met in Dublin ("the Dublin Meeting"). There is a dispute both as to what was said in the discussions at the Dublin Meeting and the conclusions to be drawn from those discussions. AerCap contends that Avia consented unconditionally, if for good reason, to the release of the first and second deposits from the escrow account and their payment to AerCap. Avia's case is that it agreed to the release of the first and second deposits from the escrow account to Aercap, on the terms of an express or implied oral agreement ("the Dublin Agreement"), releasing it from any obligation to pay the third deposit prior to delivery of the Aircraft. Subsequent to the Dublin Meeting, the first and second deposits were released to AerCap from the escrow account. The third deposit was never paid. The discussions as to a finance lease came to nothing. On the 10 th February, 2009, AerCap sent a "Legal Notice" to Avia ("the 10 th February notice") stating that Avia's failure to pay the third deposit and to further perform any of its obligations under the Agreement constituted a repudiation of the Agreement, which AerCap accepted, so bringing the Agreement to an end. The 10 th February notice further reserved AerCap's rights to claim damages. Discussions as to an operating lease of the Aircraft to Avia, first mentioned prior to the 10 th February, continued thereafter but, so to speak, fizzled out. On the 23 rd March, 2009, AerCap sent a "Demand Letter" to Avia ("the 23 rd March demand"), reiterating the contents of the 10 th February notice as to Avia's (alleged) repudiation of the Agreement and now demanding payment of very substantial damages in the amount there set out. On the 7 th April, 2009, Avia wrote to AerCap requesting a pre-purchase inspection of the Aircraft, to which it was entitled under the Agreement – if the Agreement remained in force. On the 17 th April, 2009, Aercap declined the request, maintaining that it had already accepted Avia's breach/es of contract bringing the Agreement to an end. A further AerCap letter to Avia, dated the 24 th April, 2009 was, essentially, to the same effect. Avia's counterclaim, to which reference has already been made, was premised on AerCap's alleged breach of the Dublin Agreement and/or its repudiatory and/or renunciatory breach of the Agreement. It is unnecessary to take time over an alleged total failure of consideration, an argument not pursued at the hearing. It is not in dispute that AerCap ultimately re-sold the Aircraft, by an agreement dated 3 rd March, 2010 ("the resale agreement"), at a price significantly less than the Agreement price, after all adjustments. I shall of course return to the detail in due course; here it suffices to note that the damages claimed by AerCap under this heading, after giving credit for the first and second deposits payments, amount to some US$7,254,178.24. There was considerable debate at the trial, going to the measure of damages contended for by AerCap, matters of timing and the value of the Aircraft. Additionally, AerCap claimed some US$112,972.47 by way of storage and insurance costs. This brief summary encompasses the central areas of dispute between the parties. There were, however, other matters in dispute, some of which were raised by Avia very late in the day. i) First – and in fairness to Avia, in dispute throughout – was a claim by AerCap for compensation under cl.5 of the Agreement in an amount of US$65,095.89, for lost rental arising from early redelivery of the Aircraft from their then lessee, to facilitate delivery under the Agreement. ii) Secondly, by way of re-amendment first ventilated before a Court on the opening day of the trial, Avia submitted that the Engines of the Aircraft (as referred to in the Agreement) were themselves specific goods ("the Engines point"). Relying on the Engines point, Avia went on to dispute that AerCap would have been in a position to deliver the contractually agreed Engines under the Agreement, given the leasing commitments into which it had entered. If so, then any repudiation of the Agreement by Avia was justified and/or AerCap had not suffered any loss. iii) Thirdly and first canvassed in the course of closing submissions, insofar as AerCap's ability to deliver the Aircraft under the Agreement hinged on the agreement of a third party – the then lessee of the Aircraft – any damages claimed by AerCap were to be assessed not on the balance of probabilities but on the principle of a loss of a chance. Avia's submission was that the adoption of this approach required a significant discount from any damages otherwise recoverable by AerCap. THE PRINCIPAL ISSUES As it seems to me, the principal issues are as follows: i) Putting the Engines point to one side, was AerCap entitled to treat Avia as in repudiatory and/or renunciatory breach of the Agreement? ("Issue (I): Repudiation and/or renunciation on the part of Avia") ii) If AerCap was otherwise entitled to treat Avia as in repudiatory and/or renunciatory breach of the Agreement, was Avia's breach of contract justified by the Engines point and/or did the Engines point mean that AerCap had suffered no loss? ("Issue (II): The Engines point") iii) Was AerCap itself in breach of the Dublin Agreement (if any such agreement was reached) and, if so, in repudiatory and/or renunciatory breach of the Agreement? ("Issue (III): Breach, repudiation and/or renunciation on the part of Aercap") iv) Were the damages to which AerCap was entitled to be assessed on the principle of a loss of a chance and, if so, what (if any) discount should be applied? ("Issue (IV): Loss of a chance") v) Was AerCap entitled to compensation for lost rental pursuant to clause 5 of the Agreement? ("Issue (V): The cl. 5 point") vi) What is the true quantum of Aercap's loss and damage? ("Issue (VI): Quantum"). I shall deal with each of these Issues in turn. ISSUE (I): REPUDIATION AND/OR RENUNCIATION ON THE PART OF AVIA As already indicated, in dealing with this Issue, I put the Engines point to one side. (1) The terms of the Agreement: I begin with the terms of the Agreement relevant to this Issue: " 1. DEFINITIONS AND INTERPRETATION 1.1 Definitions 'Aircraft' means, collectively or individually as the context requires: (a) the Boeing 757-200 Aircraft with manufacturers serial numbers 26963 and 26964 and registration marks G-BYAD and G-BYAE respectively as described in part 1 of schedule 1; and (which term) includes, where the context admits, a separate reference to the Engines, Parts and Aircraft Documents of each Aircraft). 'Default' means any of the following events….(ii) failure to pay the Deposit….in accordance with the terms of this Agreement…. 'Deposit' means, for each Aircraft, the sum of Six Hundred Fifty Thousant Dollars ($650,000) which for each Aircraft consists of the First Deposit, the Second Deposit and the Third Deposit for each Aircraft 'Escrow Agreement' means the escrow agreement entered or to be entered into on or around the date hereof among the Seller, the Buyer and Calyon as Escrow Agent; 'First Deposit' means an amount equal to Two Hundred and Fifty Thousand Dollars ($250,000) for each Aircraft; 'Non-Delivery' means either that Delivery of a particular Aircraft shall not have occurred on or prior to the Final Delivery Date in respect of that Aircraft or that the obligations of the Seller to sell, and of the Buyer to buy, the Aircraft shall have been terminated, on or prior to the Final Delivery Date, in accordance with the terms and conditions of this Agreement as they relate to a particular Aircraft; 'Proposed Delivery Date' means, subject to cl. 5.1 hereof, 25 May 2009 with respect to Aircraft …26964 and 25 November 2009 with respect to Aircraft…..26963 'Second Deposit' means an amount equal to Two Hundred and Fifty Thousand Dollars ($250,000) for each Aircraft; 'Third Deposit' means an amount equal to One Hundred and Fifty Thousand Dollars ($150,000) for each Aircraft; 3. CONDITIONS 3.1 Seller's Conditions ….. The obligation of the Seller to sell and deliver the Aircraft…is subject to the further conditions that, immediately prior to Delivery: 3.1.2 The Buyer shall not be in Default of its obligations under this Agreement or the Escrow Agreement; 8. DEPOSIT AND OTHER PAYMENTS 8.1 Deposit The Seller acknowledges that it has received the First Deposit prior to the date of this Agreement. The Seller shall, promptly following the execution of the Escrow Agreement, pay the First Deposit …..to the Escrow Account to be held by the Escrow Agent pursuant to the terms of the Escrow Agreement. The Buyer shall (I) within 2 (two) Business Days following the execution of this Agreement, pay the Second Deposit in full….to the Escrow Account and (II) not later than two (2) Business Days after 1 January 2009, pay the Third Deposit in full….to the Escrow Account, both sums referred to in (I) and (II) above to be held by the Escrow Agent pursuant to the terms of the Escrow Agreement. 8.2 Refund The Deposit is non-refundable except in the event of Non-Delivery. On the date on which Non-Delivery occurs, the Escrow Agent shall….release from escrow….the Deposit to the Buyer….unless such Non-Delivery shall have occurred by reason of any failure by the Buyer to comply with its obligations hereunder or otherwise by reason of the Buyer's negligence or wilful misconduct in which case the Escrow Agent shall ….release from escrow the Deposit to the Seller…. 12. MISCELLANEOUS 12.1 This Agreement….contains the entire agreement and understanding between the Buyer and the Seller relating to the sale of the Aircraft and supersedes any previous understanding, commitment, agreement or representation whatsoever, oral or written. This Agreement may only be amended by an instrument in writing entered into on or after the date of this Agreement executed by or on behalf of the Buyer and the Seller …….. 12.2.1 no waiver shall be effective unless specifically made in writing and signed by a duly authorised officer of the party granting such waiver" For completeness, the "Escrow Agreement", as contemplated in the Agreement, was duly entered into on the 21 st October, 2008, between AerCap, Avia and Calyon, as the Escrow Agent. As already foreshadowed, the First and Second Deposits were duly paid into escrow, pursuant to the Escrow Agreement. The terms of the Escrow Agreement reflected the provisions of cl. 8.2 of the Agreement (set out above) as to the release of the deposit payments from escrow to either AerCap or Avia. (2) The rival cases: In the briefest outline, Mr. Shah QC, for Aercap , submitted that this litigation involved a "paradigm example of a defendant desperate to avoid the inevitable". As was not in dispute, Avia's failure to pay the third deposit constituted a repudiation of the Agreement, unless some defence could be constructed on the basis of the alleged Dublin Agreement (or the Engines point). There had been no Dublin Agreement, still less any Dublin Agreement which assisted Avia's defence. The evidence did not support Avia's case and the suggested Dublin Agreement made no commercial sense – involving, as it did, Aercap's agreement to commit the Aircraft to Avia in circumstances where it was known that Avia would be unable to finance their purchase under the Agreement. Against the background of Avia's financial difficulties and its inability or unwillingness to proceed either with the Agreement or the proposed financial lease, Avia's conduct unequivocally evinced the intention not to perform the Agreement or to proceed with any transaction by which it would ultimately acquire the Aircraft. As it was entitled to do, AerCap accepted Avia's repudiation and/or renunciation of the Agreement by the 10 th February notice. For Avia, Mr. Adair submitted that in the light of the release of the first and second deposits from escrow and their payment to AerCap, it was plain that there had been a variation of the Agreement; the real question went to the terms of the variation. Avia had not released the first two deposits "gratuitously". There had been an express or implied agreement to do so, in consideration of an agreement by AerCap not to require the payment of the third deposit. Clarifying his case on the first day of the trial, Mr. Adair submitted that the express agreement involved a representative of AerCap at the Dublin Meeting saying to Mr. Kocetkov: "…would you agree to release the $1 million that is presently held representing the first and second deposits, to make up for the non-payment of the third deposit? " As it evolved in Mr. Adair's closing submissions, Avia's case as to the Dublin Agreement was, in summary, as follows: i) AerCap, in return for the release of the first and second deposits from escrow, had given up the right to receive the third deposit prior to delivery of the Aircraft. ii) To protect itself, AerCap was at liberty to re-market the Aircraft. iii) The Dublin Agreement did not resolve the question of what would happen in the event of AerCap finding another buyer in the course of re-marketing the Aircraft. iv) In the absence of any subsequent agreement between AerCap and Avia, a resale of the Aircraft by AerCap to another buyer would involve a repudiatory breach of the Agreement on the part of AerCap. v) The analysis was this: given the variation of the Agreement and the acceptance that the third deposit was not due (prior to delivery), Avia was not in breach of the Agreement. vi) Avia's case did not lack commercial logic. AerCap was better off after the Dublin meeting than it had been before by US$1 million – the total of the released first and second deposits. (3) The facts: During the trial, I heard oral evidence relevant to this Issue from Mr. Den Dikken, Ms. Browne and Mr. Butler, called by AerCap and from Mr. Kocetkov, called by Avia. The outline of the facts which follows is based on the contemporaneous documents and the evidence of these witnesses. Where appropriate, I shall indicate whose evidence I have preferred and why. To begin with, relations were good between Ms. Browne, Vice President Marketing of an associate company of AerCap and Mr. Kocetkov, then Chief Executive Officer ("CEO") of Avia. A Mr. Belotelov, who did not give evidence, was, at the time, the Chairman of Avia's board of directors. As will be recollected, the third deposit was payable (into escrow) by the 5 th January, 2009. On or about the 18 th December, 2008, Mr. Kocetkov indicated to Ms. Browne that the third deposit would shortly be paid and gave an instruction to Avia's accounting officer to this effect; he thought that his instruction had been carried out. In the event, however, the Chief Financial Officer ("CFO") of the group, countermanded that instruction, it would seem by reason of concerns as to FlyLAL, to which Avia had already leased two other aircraft. The result of those concerns and their impact on cash flow was that, as Mr. Kocetkov explained in evidence, the shareholders were not prepared to put Avia in funds to pay the third deposit. In the event, Mr. Kocetkov became aware that the payment had not been made by about the new year. In the meantime, by about the 22 nd December, 2008, Ms Browne had herself become aware that the funds had not been transferred. Until the 5 th January, Ms. Browne did not see the need to pursue the payment more vigorously. On the 5 th January, she spoke to Mr. Kocetkov on the telephone; he told her that he was on vacation but would check the position and revert. Shortly therafter, Ms. Browne received a telephone call from Mr. Belotelov, who informed her, frankly and honestly (as she put it in her evidence), that Avia was having financial difficulties. Mr. Belotelov wanted to forewarn AerCap of the "planned liquidation" of FlyLAL and indicated that this had knock-on effects for the group. Avia had expected to lease the Aircraft to FlyLAL – a lease which would have provided funding for the purchase – but that prospect had now fallen away. Additionally, Mr. Belotelov said that the shareholders would no longer support the acquisition. All this came as a surprise to Ms. Browne, not least in the light of Mr. Kocetkov's earlier indications that the third deposit payment would be made. Her understanding was that alternative financing was required by Avia, for any purchase of the Aircraft to proceed. Implicit in this was that if such alternative financing could not be found, then the whole transaction could not proceed. Over the next few days, regular discussions followed between Ms. Browne and Messrs. Kocetkov and Belotelov, with a view to exploring financially viable alternatives to enable Avia to acquire the aircraft. By the 7 th January, Ms. Browne had spoken to Mr. Belotelov about a finance lease. Thereafter, AerCap put forward proposals as to a financing schedule, envisaging, broadly (for the first of the Aircraft to be delivered), a loan by AerCap of 75% of the purchase price, a down payment by Avia of US$3-4 million, monthly payments of US$220,000 at an interest rate of 8% over a term of 3 years, with Avia making a final balloon payment of US$5,750,000 odd at the end of the term and at that point having the option of taking title to the aircraft in question. As to the second of the Aircraft to be delivered, the down payment would appear to have been in the region of US$2 million plus. Although Ms. Browne had been told by Mr. Kocetkov that he was talking to a number of banks about financing, Mr. Butler's evidence was that without the AerCap financing proposals, Avia would have had difficulty raising finance in the prevailing business climate. Mr. Butler, it may be noted, was the Chief Trading Officer of an AerCap associate company. AerCap's interest was to explore this alternative to the Agreement with the aim of achieving the same net financial outcome. It may be observed that as Avia had already had difficulty funding a deposit payment of US$300,000, finding some US$3-4 million plus about US$2 million for the Aircraft would not be easy. In the event, the parties arranged to meet in Dublin on the 21 st January. By then, as noted earlier, FlyLAL had ceased operating. Against this background, I am satisfied that both parties came to the Dublin Meeting (on the 21 st January) with the knowledge that the transaction was at risk, because of Avia's financial difficulties but in the hope that it might be salvaged in some form – perhaps by way of a financial lease if not as a straightforward sale and purchase. The Dublin Meeting was attended by Mr. Den Dikken, Ms. Browne and Mr. Butler, representing AerCap and Messrs. Belotelov and Kocetkov, representing Avia. On all the evidence, I have little difficulty in concluding that the principal features of the discussion at the Dublin Meeting can be summarised as set out in the paragraphs which follow. First, the AerCap proposal of a finance lease was discussed. At the end of the Dublin Meeting, Avia was to consider the proposal further and revert. Secondly, it was or became clear that Avia did not have the means of financing payments due under the Agreement; although there was mention of Avia having discussions with banks, it had not been able to secure financing to enable it to proceed with the Agreement. Thirdly, Mr. Den Dikken (not Ms. Browne, contrary to some Avia suggestions) asked Avia to release the first and second deposit payments to AerCap from the escrow account. Neither Mr. Den Dikken, nor any AerCap representative said that the release was "to make up for the non-payment of the third deposit" or anything like those words. Avia agreed to do so and, as already recorded, subsequent to the Dublin Meeting the sum of US$1 million was released to AerCap. Fourthly, Avia did not agree "gratuitously" to release the first and second deposits. It did so, doubtless, in the light of an awareness of its own weak bargaining position at the time of the Dublin Meeting, arising from its non-payment of the third deposit. As Mr. Den Dikken explained his understanding of the parties' respective negotiating positions, Avia had been in breach of contract, so that AerCap could terminate it at any time, albeit that it was willing to discuss alternative arrangements. Accordingly, Avia agreed to the release in order to stave off the termination of the Agreement, while further discussions took place as to a viable alternative transaction, by which Avia would acquire the Aircraft. i) In his evidence, Mr. Den Dikken put the matter this way: " ….the most plausible explanation for them agreeing to this is that they wanted…..us to continue to have a discussion about alternative arrangements which were subsequently also pursued." ii) To my mind, Mr. Kocetkov's oral evidence was to much the same effect. He expressed the belief that the Agreement had not been cancelled because of the release of the funds from escrow, "as a trade for that". In answer to questions from me and, thereafter, Mr. Shah, Mr. Kocetkov said this: " A. We discussed that we continue the sale agreement, and this is used as a trade, I mean releasing the security deposit from the escrow account. Mr. SHAH: A trade for that? A. For continuing with the sales transaction. It does not matter in what form it would realise, financial lease or outright purchase of sale." Later in Mr. Kocetkov's cross-examination, there was this exchange: " Q. And so far as your understanding is concerned of the meeting in Dublin the agreement would continue whilst you were exploring alternative ways of proceeding? A. Yes……. Q. …Your understanding then of this agreement that you say was reached in Dublin was it would continue so long as there was a viable alternative being considered. A. We had been considering many alternatives…. Q. If the alternatives disappeared or did not come to anything then Aercap would be able to terminate? A. Yes, and this is why we agreed that they market the aircraft in the end." Fifthly, Mr. Den Dikken told Avia that AerCap would start re-marketing the Aircraft. In his evidence, Mr. Kocetkov (in re-examination) agreed that this was so, adding that Avia agreed "…to make sure that we just continue our negotiations". There are no contemporaneous documents emanating from Avia to contradict this summary or supporting the "Dublin Agreement" in the terms for which it has contended. By contrast, Ms. Browne's contemporaneous report to the AerCap Board, dated 26 th January, 2009, does lend support to the AerCap case (save, possibly, only in respect of some details of the proposed finance lease) and fortifies me in my conclusion as to what was said at the Dublin Meeting. Ms. Browne's report said this: " ….. The Servicer met with AAM on 22 January and proposed outline terms and conditions for termination of the current purchase agreement combined with an operating [ sic, here meaning 'finance'] lease structure with a rolling purchase option for three years. In the event AAM do not exercise the purchase option, they continue to lease the aircraft until the end of the five year lease term. The proposal included an upfront cash payment by AAM of $2.5M per aircraft. AAM has reverted and confirmed it will not be capable of making such upfront cash payments and advised that they will consider providing us with a counterproposal this week. In the meantime, they have agreed to release the $1M commitment fee from escrow, and that cash will be transferred to APL. They have been advised that the Servicer has recommenced marketing the aircraft in parallel. In the absence of an acceptable counterproposal from AAM the Servicer will seek to recover its damages for breach of contracts from AAM…. " On the 27 th January, Mr. Belotelov e-mailed AerCap rejecting the proposal of a finance lease, in the following terms ("the 27 th January e-mail"): " As a follow up to the discussion we had in Dublin regarding the state of the transaction for the acquisition by AAM of …[the Aircraft]…: At this stage it is more than difficult for AAM to accept proposed by AerCap finance lease arrangement which would require from AAM to pay more than $3 Mln 'in cash' at Delivery of the first Aircraft and more than $2 Mln at second delivery. Again, to reiterate AAM's position – we are prepared to take delivery of both Aircraft on dry lease basis. With more or less market average dry lease security deposits to be paid in addition to $1,000,000 which is already paid by AAM…. " In my judgment, it followed from this response of Mr. Belotelov, first, that Avia could neither afford the down payments of US$3 million plus US$2 million, required to proceed with the finance lease, still less the US$30 million odd to purchase the Aircraft under the Agreement. Secondly, on the face of this e-mail, it seems inescapable that Avia was unwilling to proceed with a transaction by which it would ultimately purchase the Aircraft (the dry lease being a lease simpliciter , with no purchase option, would not entail Avia acquiring the Aircraft). Thirdly, even as to the dry lease, Mr. Belotelov had put forward nothing in the way of a detailed suggestion. On the 2 nd February, Ms. Browne invited Mr. Belotelov and Mr. Kocetkov to be AerCap's guests at a rugby international in Dublin on the 7 th February, an invitation which Mr. Kocetkov accepted. The occasion gave Mr. Kocetkov an opportunity to meet other financiers present. Nothing came of it in respect of the present transaction. I accept Ms. Browne's evidence that the intention behind the invitation was simply to assist Avia, regardless of whether the transaction would proceed. I do not think that this corporate hospitality carried any particular significance for the disputes with which I am concerned; nor do I think that it undermines AerCap's evidence as to its impression of Avia's conduct. On the 10 th February, AerCap sent the 10 th February notice, as previously recorded. It may be noted that the document is headed "LEGAL NOTICE – URGENT ATTENTION REQUIRED". By this time, the third deposit had been unpaid for over a month and, to my mind, the ramifications of the 27 th January e-mail (considered above) were apparent. It is common ground that Ms. Browne spoke on the telephone with Mr. Kocetkov prior to dispatching the 10 th February notice. In his evidence, Mr. Kocetkov, asserted that Ms. Browne told him the document was "just a formality"; because of that, although he passed it to his legal counsel, he did not respond to it. Ms. Browne's evidence was very different. She had called Mr. Kocetkov at Mr. Den Dikken's request, effectively as a courtesy; the conversation had been very brief; she had said that there would be a notice; the matter was out of her hands because it had now been passed to her legal department. I accept Ms. Browne's evidence and reject that of Mr. Kocetkov on this topic. Ms. Browne's evidence is inherently credible; it is unsurprising that a commercial organisation would wish to forewarn a business partner that such a legal notice was on its way. The heading of the document itself underlined its seriousness. At best, Mr. Kocetkov may have misunderstood the courtesy involved in the telephone call though, with respect, I think that Mr. Kocetkov's evidence here (and elsewhere, dealt with below) betrayed a refusal to accept the reality of the situation. It would have been curious indeed for Ms. Browne to undermine the importance of the document and she had no reason to do so. But quite apart from the inherent unlikelihood of Mr. Kocetkov's account being correct, it is internally contradictory. On his own evidence, the document was such that Mr. Kocetkov thought it appropriate to pass it to his legal counsel. For my part, I am satisfied that Mr. Kocetkov was under no illusions as to the significance of the 10 th February notice. In the light of this conclusion, it is noteworthy that Avia made no response to the 10 th February notice – and, in particular, noteworthy that Avia said nothing of the alleged Dublin Agreement. Subsequent to the 10 th February notice, there were discussions between the parties as to a dry lease. Ms. Browne sent Avia proposals on the 12 th February and Mr. Belotelov countered on the 3 rd March, apologising for the delay in replying and saying that the suggested rental was excessive in the market conditions then current. Mr. Belotelov's e-mail said nothing either as to the 10 th February notice or the alleged Dublin Agreement. Ms. Browne followed up the 3 rd March e-mail with a telephone call to Mr. Belotelov to discuss his comments; he said that he would revert to AerCap but never did so. As already noted, AerCap's 23 rd March demand followed. In his oral evidence, Mr. Kocetkov acknowledged that this was a "serious letter" and that Avia was "in shock". Nonetheless, Avia again made no reply, even though it was now facing a damages claim in the order of US$10 million. All that Avia did was to make its 7 th April request for a pre-purchase inspection, which requires no further discussion at this point. (4) Conclusions: Having set out the facts at some length, I can state my conclusions on this Issue relatively shortly. Looking at the matter overall, I am amply satisfied that the root cause of the problems in this case concerned the financial difficulties encountered by Avia. It is those difficulties, stemming from FlyLAL's collapse and extending to the reluctance of Avia's shareholders to fund the deal, which led to the non-payment of the third deposit and Avia's unwillingness to proceed with either the Agreement or an alternative by way of a financial lease. In my judgment those difficulties were both serious and likely to be long-lasting. This was no temporary hiccup. These difficulties afflicting Avia formed the backdrop to the Dublin Meeting. By then it was apparent that the transaction was unlikely to proceed in accordance with the Agreement. Both parties would, understandably, have preferred to preserve a transaction involving Avia's acquisition of the Aircraft, to no deal and possible litigation. Conceptually a financial lease provided an alternative; it was, however, never going to be easy for Avia and the 27 th January e-mail finally dashed any hopes as to its viability. Some brief observations on the witnesses may next be appropriate. As far as it goes, I see the force of Mr. Adair's submission that both Mr. Den Dikken and Ms. Browne were to a degree defensive concerning the benefit to AerCap in receiving the first two deposits early and as to the variation in the Agreement thus entailed. But, to my mind, the defensiveness was readily understandable once the matter is seen in context. For although there was a benefit to AerCap in receiving the US$1 million early, this was a very mixed blessing. First, by then AerCap was contractually entitled to have US$1.3 million in escrow. Secondly, AerCap was now in a position of having to re-market the Aircraft on (as will be seen) a falling market. Thirdly, by the time of the Dublin Meeting, it was at least a very strong possibility that the transfer of the deposit payments to AerCap was only anticipating the inevitable – see cl. 8.2 of the Agreement. In these circumstances, I can appreciate the reluctance of these witnesses to rally enthusiastically to the suggestion that developments at the Dublin Meeting left AerCap better off than it had been before. Overall, I am satisfied that all the AerCap witnesses were reliable; it is to be underlined that the evidence they gave was consistent with the contemporaneous documentation. Although, with respect, by no means without charm, Mr. Kocetkov was an altogether less reliable witness. In part, as already foreshadowed, this stemmed from a reluctance to admit to the commercial realities. In part too, his evidence had an air of bravado, perhaps resulting in a somewhat cavalier approach to the facts. Some brief examples will suffice. First, at one point in his evidence, Mr. Kocetkov said that the outstanding US$300,000 deposit payment was not a substantial sum; if that was so, it at once invited the question of why Avia was unable or unwilling to pay it. Secondly, when asked, in the light of other evidence he had given, why the outstanding deposit payment had not been made at the beginning of February, he answered that Avia had not been asked to. That answer, if I may say so, did Mr. Kocetkov no credit; as he well knew, the tender of the third deposit payment at the beginning of February would have been a most welcome development. Thirdly, Mr. Kocetkov sought at times to make light of Avia's financial difficulties. That evidence is simply belied by Avia's conduct and the contemporaneous e-mail traffic between January and April 2009. Moreover, although Mr. Kocetkov's oral evidence did contain suggestions of possible sources of financing (including one reference to Lithuanian local banks), these were never more than assertions; documentary support for these suggestions was wholly lacking. Fourthly, I have already commented, adversely, on Mr. Kocetkov's evidence in respect of the 10 th February notice. AerCap's case was that Avia was in repudiatory and/or renunciatory breach of the Agreement. I begin with repudiatory breach . It was common ground that Avia's non-payment of the third deposit constituted a repudiatory breach of the Agreement unless Avia could rely on the Dublin Agreement (in the terms alleged by Avia) or on the Engines point. Such common ground was inevitable in the light of the definition of "Default" in and cl. 3.1 of, the Agreement. For the moment I am concerned with the Dublin Agreement. I am wholly unable to accept that there was a Dublin Agreement in the terms contended for by Avia or anything approximating to them. First, on my findings as to the facts and evidence, there was no such express agreement. Secondly, nothing in the circumstances of the Dublin Meeting or the words or conduct of the parties came even close to disclosing an implied Dublin Agreement which could assist Avia's case. Insofar as elaboration is necessary: i) Any such agreement would not have made commercial sense. As Mr. Shah submitted, it would have involved AerCap's agreement to commit the Aircraft to Avia in circumstances where Avia faced manifest and acknowledged difficulties in financing their purchase under the Agreement. ii) Avia's acceptance that AerCap would re-market the Aircraft by itself tells strongly, perhaps decisively (if that were necessary) against the existence of any such agreement. iii) Had there been a Dublin Agreement as contended for by Avia, it is remarkable that Avia made no reference to it contemporaneously – in particular after receipt of the 10 th February notice and the 23 rd March demand. iv) As already indicated, I think that an agreement was reached at the Dublin Meeting – but not the agreement contended for by Avia. In accordance, as it seems to me, with the evidence of both Mr. Den Dikken and Mr. Kocetkov, Avia agreed to the release of the first and second deposit payments to AerCap in order to stave off termination of the Agreement, while further discussions took place as to a viable alternative transaction, by which Avia would acquire the Aircraft. Such an agreement made commercial sense; it accorded with the hope of both parties that, if possible, the transaction should be preserved and there should not be precipitate recourse to litigation. But an agreement of that nature does not assist Avia's case; it did not involve AerCap releasing (or absolving) Avia from payment of the third deposit until delivery of the Aircraft while locking AerCap into the Agreement in the interim. Once it became clear that there was no viable alternative, AerCap was entitled to terminate the Agreement. I have not in all this lost sight of Mr. Adair's submissions, summarised earlier. With respect, however, they lack any or any satisfactory evidential basis. Moreover and notwithstanding their elegant construction, there is an air of unreality about the argument. This is most apparent when considering Mr. Adair's attempt to grapple with the difficulties posed by AerCap's re-marketing the Aircraft with Avia's agreement or acquiescence. To do so, he was driven to submit that should AerCap's efforts prove successful, AerCap would itself be in repudiatory breach if it sold the Aircraft to another buyer, absent a further agreement with Avia. Not only is there is no proper foundation for this argument but it flies in the face of the commercial realities as to the parties' respective bargaining power. For all these reasons (while continuing to defer consideration of the Engines point), I have no hesitation in concluding that Avia was in repudiatory breach of the Agreement; there is no Dublin Agreement to preclude me from arriving at this decision. By the 10 th February notice, AerCap, accepted that repudiatory breach, as it was entitled to do, so terminating the Agreement. For completeness, I record that Mr. Shah advanced a number of additional arguments in support of AerCap's case on the absence of any Dublin Agreement and on repudiatory breach, including an argument based on cl. 12 of the Agreement. It is unnecessary to take time over those arguments here. My conclusion as to repudiatory breach is sufficient to decide Issue (I) in AerCap's favour but I go on to consider renunciatory breach . In my judgment, here too, the answer is plain. The test is well-known and the law well established; it is unnecessary to go beyond the observations of Devlin J (as he then was), in Universal Cargo Carriers v Citati [1957] 2 QB 401, at p.436: " A renunciation can be made either by words or by conduct provided it is clearly made. It is often put that the party renunciating must 'evince an intention' not to go on with the contract. The intention can be evinced either by words or by conduct. The test of whether an intention is sufficiently evinced by conduct is whether the party renunciating has acted in such a way as to lead a reasonable person to the conclusion that he does not intend to fulfil his part of the contract. " As already underlined, by the 10 th February, 2009, it was plain that Avia was unwilling to proceed with the Agreement, in accordance with its terms, requiring the payment of the third deposit and the further payment of some US$15 million per aircraft on delivery. From the 27 th January onwards, it was likewise plain that a finance lease was not a viable alternative. Even if anything came of the very tentative suggestion of a dry lease, that would involve a transaction fundamentally different from the Agreement. On my earlier conclusions, there was no Dublin Agreement to assist Avia. If anything, AerCap exercised patience in waiting as long as it did before sending the 10 th February notice; any reasonable party's patience would by then have been exhausted. Time for Avia had run out. I have no hesitation in concluding that by the 10 th February, Avia was in renunciatory breach of the Agreement which AerCap was entitled to accept, so terminating it. ISSUE (II): THE ENGINES POINT (1) Introduction: In my ruling on the first day of the trial I commented critically on Avia's failings in introducing this point so late in the day. It is unnecessary to go over that same ground here. In the event, if very much on balance, I acceded to Avia's application to re-amend to advance the Engines point. Fortunately, the point was ultimately accommodated within the original estimated length of the trial. The Engines point appears from the following paragraphs in the Re-Amended Defence and Counterclaim: " 5A. The Sale Agreement was an agreement for the sale of the following specific goods, as defined by section 61 of the Sale of Goods Act 1979: (1) Boeing B757-200 Aircraft bearing the serial numbers26963 (i.e. Aircraft 1) and 26964 (i.e. Aircraft 2); and (2) Four RB211-535E4 Rolls Royce engines bearing the serial numbers 31211, 30835, 30872 and 30824 ('the Engines') 14.….. (2A) …. Aercap was unable to deliver the Engines on the Final Delivery Dates of 30 th June 2009 and 31 st December 2009 or the Proposed Delivery Dates of 25 th May 2009 and 25 th November 2009 and, therefore, incapable of discharging its obligations under the Sale Agreement. Aercap's inability to perform its obligations justifies any repudiation of the Sale Agreement by Avia and/or means that Aercap would have been unable to earn the contract price due under the Sale Agreement. 18.….. (1A) Due to the fact that they were leased to third parties, Aercap was incapable of delivering the Engines to Avia on the delivery dates and was not capable, therefore, of discharging its obligations under the Sale Agreement." As to the meaning of "specific goods", they are defined in s.61 of the Sale of Goods Act 1979 , as follows: " 'specific goods' means goods identified and agreed on at the time a contract of sale is made…." As observed in Benjamin's Sale of Goods (7 th ed.), at para. 1-114: " Specific goods are by the agreement of the parties designated as the unique goods which can be delivered by the seller in performance of his obligations; their individuality is established, so that there is no room for further selection or substitution." In a nutshell, therefore, the Engines point involved Avia contending that the engines to which reference was made in the Agreement ("the Engines") – as well as the Airframes – were specific goods; that by reason of its prior leasing commitments, AerCap would not have been in a position to deliver the Engines by the delivery dates in the Agreement; accordingly, any repudiation of the Agreement by Avia was justified; alternatively, AerCap had suffered no loss (or was entitled to nominal damages only). The Engines point thus gives rise to two principal questions: i) Were the Engines specific goods? ("Question 1") ii) If the Engines were specific goods, could AerCap have delivered the Engines in accordance with the Agreement? ("Question 2") In the light of the manner in which the evidence developed (relevant to Question 2), by the time of final speeches Mr. Adair was driven to accept that all that remained of the Engines point was the question of the loss of a chance, going (as he put it) to the quantification of damages (and dealt with here as Issue (IV)). Whether the loss of a chance analysis is well-founded is another matter (addressed below) but Mr. Adair was realistic to make the concession he did. The consequence is that Avia ultimately does not rely on the Engines point in an attempt to justify its repudiation of the Agreement – as I have held under Issue (I); the Engines point is now said only to go to issues concerning quantum. I must, however, still deal with Questions 1 and 2, as they have a knock-on significance for Issue (IV). Question 1: Were the Engines specific goods? I turn to the Agreement. In addition to the terms already set out, the terms which follow are directly relevant to the Engines point: " 1. DEFINITIONS AND INTERPRETATION 1.1 Definitions 'Airframe' means the Aircraft, excluding the Engines and the Aircraft Documents; 'Engine' means, in relation to any Aircraft, the engines of the manufacture and model specified in schedule 1, together with all modules and Parts belonging to, installed in, or appurtenant to, such engines at the time of Delivery; 7. DELAYED DELIVERY AND FAILURE TO DELIVER 7.1 Total loss before Delivery: Airframe 7.1.1. If before Delivery an Airframe suffers a Total Loss, the Seller shall notify the Buyer …..and, with effect from the date of such Total Loss, the Seller's obligation to sell and the Buyer's obligation to purchase the Aircraft to which the Airframe relates shall terminate, and the Seller shall return or shall cause the Deposit allocated to such Aircraft…..to be returned to the Buyer…… 7.2 Total Loss before Delivery: Engines If before Delivery a Total Loss occurs with respect to an Engine but not the Airframe, the Seller shall notify the Buyer….and, unless the destroyed Engine has been replaced prior to Delivery with an engine of the same type, model, thrust rating and same or better age as the Engine it is replacing prior to such Total Loss, the Seller and the Buyer shall each be entitled to terminate their respective obligations to sell and purchase the Aircraft….. SCHEDULE 1 Part 1 Specification of Aircraft Aircraft Manufacturer: Boeing Model: Boeing B757-200 Serial Number: 26963 Engines Manufacturer: Rolls Royce Model: RB211-535E4 Serial Number: 31211 and 30835 Thrust: 40,100 lbs MTOW: 250,000 lbs ……. [Aircraft] Manufacturer: Boeing Model: Boeing B757-200 Serial Number: 26964 Engines Manufacturer: Rolls Royce Model: RB211-535E4 Serial Number: 30872 and 30824 Thrust: 40,100 lbs MTOW: 250,000 lbs …… SCHEDULE 5 Purchase Price Maintenance Adjustment The Purchase Price of each Aircraft is based on an assumed 'Half Life' condition at the Delivery Date and shall be subject to adjustment upwards in the event of a better than Half Life condition at the Delivery Date and downwards in the event of a less than Half Life condition at the Delivery Date…… SCHEDULE 6 Delivery Conditions …. Engines Each Engine will have at least 3,000 Flight Hours and 3,000 Cycles remaining before its next anticipated shop visit…… " Although at first blush there was some attraction in Mr. Adair's submission that the Engines were specific goods, on analysis of the Agreement as a whole, I am satisfied that they were not. My reasons are these: i) There is a striking contrast between the treatment of the Aircraft (for these purposes, the Airframe) and the Engines in cl. 1 (Definitions) and Schedule 1 Part 1. The definition of Airframe extends to its specific serial number. The definition of Engines is limited to their "manufacture and model specified in schedule 1". While it is true that the serial numbers of the Engines are to be found in Schedule 1, together with other data as to the Engines, the important point is that the definition of Engines in cl. 1 does not extend to such details – though they are relevant for other purposes (see below). ii) The distinction between Airframe and Engines gains emphasis from the contrasting treatment of a "Total Loss" of an Airframe (cl. 7.1) and of an Engine (cl. 7.2). If there is a Total Loss of an Airframe prior to Delivery, the obligations of the parties terminate. If there is a Total Loss of an Engine prior to Delivery, then the obligations of the parties do not terminate provided the Engine has been replaced by "an engine of the same type, model, thrust rating and same or better age". iii) Mr. Adair sought to derive support from cl. 7.2, submitting that it was otiose if the Engines were not specific goods and that only in the case of Total Loss could an Engine be substituted. I am unable to accept that submission. First, as just discussed, cl. 7.2 serves to differentiate the treatment in the Agreement of Airframe and Engines. Secondly, cl. 7.2 provides the minimum requirements for the replacement engine. It is here that the data in Schedule 1 will be relevant. Thirdly, the fact that replacement of an Engine is specifically dealt with in the case of Total Loss does not found the inference that an Engine could not be replaced in other circumstances. That is to beg the question. Moreover, given the scheme of cl. 7 of the Agreement, it was necessary, or at least appropriate, to make specific provision for the replacement of an Engine. If anything, I am inclined to the view that cl. 7.2 tends to support AerCap's case rather than Avia's; at all events, I am satisfied that it does not assist Mr. Adair's submissions. iv) All of this makes good commercial sense. There is no apparent commercial reason why the fate of such an agreement should hinge on the supply of a specific engine – provided, of course, that the buyer is protected should a different engine be substituted. The Agreement does just that – in cl. 7.2, Schedule 5 (price adjustment) and Schedule 6 (minimum condition on Delivery). Though his witness statements were relevant to Question 2 rather than Question 1, the observations of Mr. Coyle, Head of Technical for associate companies of AerCap, are both pertinent and persuasive: " It is inconceivable to me that the substitution of different engines from the pool would have been an issue for Avia, or indeed for any purchaser or subsequent lessee. The engines would have been of the correct model and type, and would have satisfied the relevant minimum conditions. The price adjustment would have been calculated in the same way. " This conclusion on Question 1 renders Question 2 very largely academic but in deference to the arguments advanced and the evidence led by AerCap at very short notice, I shall deal with it – if as briefly as possible. Question 2: If the Engines were specific goods, could AerCap have delivered the Engines in accordance with the Agreement? In order to deal with the Engines point, AerCap called Mr. Coyle (already referred to) and Mr. Harrison, the Senior Leasing Manager of TUI Travel Plc ("TUI"). In the light of the evidence given by Mr. Coyle and Mr. Harrison, I am amply satisfied that the answer to Question 2 is "yes". My reasons follow. The genesis of the Engines point was that prior to the entry into the Agreement, the Aircraft had been leased by AerCap to TUI, by leases dated the 20 th June, 2008 ("the TUI leases"). The engines actually installed on the Aircraft ("the actual engines") when leased to TUI differed from the Engines as follows: i) In respect of Aircraft 1 (26963), the actual engines were 30824 and 30825, whereas the Engines were 31211 and 30835. ii) In respect of Aircraft 2 (26964), the actual engines were 30833 and 30835, whereas the Engines were 30872 and 30824. Avia's case was that AerCap had no contractual right to call on TUI to redeliver the Aircraft with the Engines; accordingly, AerCap could not establish that the Aircraft could have been delivered under the Agreement with the Engines. If, contrary to my conclusion on Question 1, the Engines were specific goods, then AerCap's failure to deliver the Engines under the Agreement would have had the consequences previously outlined. As it seemed to me, the reason why there was a discrepancy between the Engines and the actual engines was that subsequent to AerCap entering into the TUI leases but prior to the Agreement, TUI had indicated, in an e-mail dated 14 th July, 2008, that the Aircraft would be redelivered with the Engines (even though the Engines were not then installed on the Aircraft). In that e-mail, the Engines had been referred to as "potential candidates" for redelivery. Following that indication, AerCap had referred to the Engines in the Agreement. In the event, in an e-mail dated 1 st April 2009, TUI intimated that Aircraft 2 would be redelivered with the actual engines (rather than the Engines) and thereafter indicated verbally that it wished to redeliver Aircraft 1 with engines other than the Engines. It may be noted that all the engines concerned (including the Engines) were from a pool of engines leased to TUI by AerCap. By April 2009, as will be recollected, the Agreement was at an end. Accordingly and whatever view is taken of the Engines point, AerCap had no interest in debating with TUI which engines would be installed on the Aircraft when redelivered. If, however, it had been necessary (under the Agreement) for the Engines to be installed on the Aircraft prior to Delivery to Avia, then the evidence of Messrs. Coyle and Harrison was to the same effect, with these salient features: i) There was of course no difficulty in delivering the Aircraft with Engine 30824, which was both an "Engine" and an "actual engine". ii) In any event, as to all the Engines, the following evidence of Mr. Harrison in his witness statement was not, ultimately, challenged: " I confirm that if we had been approached by Aercap prior to redelivery of either of the Aircraft asking us to redeliver with the ….[Engines]…, we would have worked with Aercap to find a solution which involved redelivering the Aircraft with the …[Engines]…." iii) Mr. Harrison went on in his witness statement to say this: " I do not see any reason why we would not have been prepared to redeliver with the….[Engines]… We would have wanted this to be at no cost to TUI, but the costs of swapping engines between aircraft would not have been significant. On the basis that any additional cost to TUI would have been met by AerCap, if AerCap had made such a request we would have agreed to it. As Senior Leasing Manager, I would ultimately have decided which engines to redeliver. I should add that AerCap is one of our largest lessors. The relationship with AerCap is therefore one that we value highly, and it was and remains a good relationship. We would have been happy to find some mutually acceptable solution that addressed AerCap's wishes." iv) There was no reason why a mutually acceptable solution would not have been found. The operation of swapping the engines was technically and logistically straightforward. There was no difficulty attaching to the condition of any of the engines concerned and all, as already underlined, came from the same pool. All the Engines met the required redelivery conditions under the Agreement. There would have been a sufficient "buffer" between the time the Aircraft were redelivered to AerCap under the TUI leases and the time for their delivery under the Agreement to Avia, for the swap to take place. It is true that AerCap would have had to meet the cost of swapping the engines but, on Mr. Coyle's evidence, that cost would not have exceeded €8-10,000 (per aircraft). Against the background of this evidence, all of which I accept, I am, with respect, wholly unimpressed with the Avia factual case on the Engines point. I am satisfied on a balance of probabilities – in fact and should it matter under Issue (IV), as a virtual certainty - that if it had been necessary for AerCap to do so, it could and would have delivered the Engines in accordance with the Agreement. For completeness, in the light of this conclusion, it is unnecessary to determine whether AerCap in any event had a contractual right, by virtue of cl. 3.3 of Exhibit F to the TUI leases, to require Avia to redeliver the Aircraft under those leases with the Engines. My inclination is that the e-mail traffic in July 2008 was too tentative to enable AerCap to invoke cl. 3.3 of Exhibit F but no useful purpose would be served by taking more time over this point. ISSUE (III): BREACH, REPUDIATION AND/OR RENUNCIATION ON THE PART OF AERCAP I deal summarily with this Issue. Having regard to the conclusions already reached under Issues (I) and (II), there was no Dublin Agreement (as contended for by Avia), so that AerCap was not and could not be in breach of it. Further, as AerCap was entitled to treat the Agreement as terminated on the 10 th February, 2009 and at all times thereafter, the Agreement had gone by the time of Avia's 7 th April request for a pre-purchase inspection. Accordingly, in declining that request, AerCap was not in repudiatory and/or renunciatory breach of the Agreement. It follows that nothing further need be said as to Avia's counterclaim. ISSUE (IV): LOSS OF A CHANCE As already indicated, this point too was a late starter, first making its appearance at the time of closing submissions. In the circumstances, I thought it appropriate to require post-hearing written submissions on the relevant authorities. The nub of Mr. Adair's argument appears from the following passage in his post-hearing submissions: " Avia's case is that even if it is found to be liable to AerCap for breach of the Sale Agreement then the principles of loss of a chance, as set out in Allied Maples , apply to the present case. Avia contends that the chance of TUI cooperating to return all of the Engines in time for them to be delivered to Avia is not better than 80% and that any award of damages must, therefore, be reduced by at least 20% (if not more)." For his part, Mr. Shah submitted that the principle of "loss of a chance" was relevant to the question of causation, as distinct from making an allowance for an unknown contingency in the assessment of damages. Avia's case had failed to recognise this distinction and had elided the principles relevant to causation with those relevant to the quantification of loss. In the present case, AerCap could prove and, on the evidence of Mr. Harrison, had proved causation on a balance of probabilities; there was accordingly no need to consider loss of a chance. The principle of loss of a chance and its sphere of application is one of no little interest. Given, however, the conclusions to which I have already come, this is not the case for any extended debate on this topic. To recap, I have already concluded: i) First, that the Engines were not specific goods; ii) Secondly, on a balance of probabilities, if it had been necessary for AerCap to do so, it could and would have delivered the Engines in accordance with the Agreement; iii) Thirdly, if it matters, the chance of AerCap doing so was a virtual certainty. To my mind, the first conclusion renders the debate on loss of a chance academic. If the Engines were not specific goods, then nothing turns on the question of TUI cooperating with AerCap to ensure their timely delivery under the Agreement. For my part, that is an end of the matter but, for completeness, I shall say something as to the second and third conclusions. As it seems to me, the second conclusion raises for consideration the question of whether the "loss of a chance" approach involves a restrictive as well as a permissive principle. In short, when a "hypothetical past event" (see, per Lord Nicholls, albeit a dissenting speech, in Gregg v Scott [2005] UKHL 2 ; [2005] 2 AC 176 , at [15]) turns on the act of a third party but the Claimant is in a position to prove causation to the standard of a balance of probabilities, is the Claimant without more entitled to recover its damages in full (subject only to contingencies affecting quantum) or must the loss of a chance analysis be applied? In the light of the first conclusion (and, for that matter the third conclusion), the present is not the right case to delve into a point of this nature, so I confine myself to the following: i) The origins of the loss of a chance principle are clearly permissive. The doctrine applies to the causation of damage and, in the circumstances where it is applicable, facilitates recovery where the uncertainty is such that a claimant would fail if required to prove its loss to a balance of probabilities: see the leading case of Allied Maples Group v Simmons & Simmons [1995] 1 WLR 1602 , in the judgment of Stuart-Smith LJ, esp. at pp. 1611 et seq . See too, Gregg v Scott (supra) , per Lord Nicholls, at [15] et seq and per Lord Hoffmann, at [82] – [83]. ii) The loss of a chance analysis applies to causation not to quantification of damage: Allied Maples (supra) , at p. 1609; Gregg v Scott (supra) , at [67] – [69], in the speech of Lord Hoffmann. Contingencies which result in a reduction in the quantum of damage have nothing to do with the claimant's inability to prove causation to a balance of probabilities or the doctrine of loss of a chance; by the time this stage of the argument is reached, the claimant will already have succeeded on the issue of causation. The decision of the House of Lords in Golden Strait Corpn v Nippon Yusen Kubishika Kaisha [2007] UKHL 12 ; [2007] 2 AC 353 ( "The Golden Victory" ) was concerned with the assessment of damages, not causation or the loss of a chance doctrine. Accordingly, the observations of Lord Carswell, at [64], relied upon by Mr. Adair, are, with great respect, not in point. I agree with Mr. Shah in this regard. iii) However and more challenging for Mr. Shah, the loss of a chance doctrine is applicable to questions of causation arising out of hypothetical past events hinging on the act of a third party. That is plain from both Allied Maples and Gregg v Scott (supra) . Where the outcome of such an event depends on what the claimant, the defendant or someone for whom the defendant is responsible would have done, the claimant must prove on a balance of probabilities that he or the defendant would have acted so as to produce a favourable outcome. By contrast, where the outcome of a hypothetical past event depends on what a third party would have done, the claimant may recover for loss of the chance that the third party would have so acted. That the loss of a chance doctrine may thus benefit a claimant is apparent (and indeed underlies the decision in Allied Maples ). But, does it follow that where a claimant is in a position to prove the outcome of a hypothetical past event turning on the actions of a third party to a balance of probabilities, he is unable to recover full damages (without more) and must nonetheless have the chance of his success evaluated? iv) As far as I could see, neither party produced an authority directly in point, addressing this very issue. Mr. Shah drew my attention to observations of Sir Donald Nicholls V-C (as he then was) in White v Jones [1995] AC 207, in the Court of Appeal, at p. 228, which suggest that straightforward full recovery is possible – but it is far from clear that any question of the loss of a chance doctrine arose for consideration. In 4 Eng Ltd v Harper [2008] EWHC 915 (Ch) ; [2008] 3 WLR 892 , David Richards J applied the loss of a chance analysis to such a case where a defendant - rather than the claimant - had submitted that a balance of probabilities test should be applied on the ground that a witness from the third party had been called to give evidence. David Richards J explained that other witnesses who might have given evidence relevant to the conduct of the third party had not been called. The learned Judge underlined that he was expressing no view on what the position would be where all the evidence relevant to the third party's conduct was available. v) If required to express a conclusion on this question, my inclination would be to decide it in favour of AerCap which, in accordance with my second conclusion, has proved causation on a balance of probabilities, on the basis of all the relevant evidence. Mr. Harrison's evidence covered the ground; there was no need to go beyond it. The rationale of the loss of a chance doctrine is to permit recovery to a claimant who, by reason of uncertainty, would otherwise be unable to prove causation to the standard of a balance of probabilities; it is not to deny full recovery to a claimant who successfully meets that burden. Underlying the loss of a chance doctrine, are, as it seems to me considerations of policy and good sense. But where a claimant can establish causation on a balance of probabilities, such considerations do not oblige the court and the parties nonetheless to evaluate the chances involved. There is no relevant uncertainty as to causation and, as Mr. Shah put it, no need to reduce the damages on the basis of a loss of chance. The claimant, as in any other case, should be entitled to full recovery, subject only to the contingencies affecting quantification of damage - inapplicable here, save in one respect to which I shall return in a moment. The third conclusion means that even if I am wrong as to my first and second conclusions, so that the loss of a chance needs to be evaluated, the outcome is so apparent that no discount needs to be made. For the reasons already given, the pointers as to what TUI would have done were overwhelming: it had an important relationship with AerCap, it wished to assist, there were no logistical or technical difficulties in the way of it doing so. In those circumstances, even if the loss of a chance doctrine was applicable, I cannot, as a matter of fact, see the need to discount the recoverable damages and I am not persuaded that there is any rule of law requiring me to do so. I add only this as to the quantification of damages. If it is necessary to go beyond the first conclusion, so that either the second or the third conclusions are applicable, then the sum of €20,000 should be deducted from the damages otherwise recoverable to reflect the cost (to be met by AerCap) of having the Engines installed on the Aircraft prior to their delivery under the Agreement – as explained by Mr. Coyle and Mr. Harrison. This point is, however, mentioned for completeness only, as by reason of the first conclusion, it is academic. ISSUE (V): THE CL. 5 POINT This Issue concerns some US$65,000, a relatively small sum in the scheme of this dispute. I must nonetheless deal with this Issue, as the parties were unable to resolve it amicably. Insofar as material, cl.5 of the Agreement provided as follows (the sub-paragraph numbering [1] and [2] in square brackets is added): " 5. DELIVERY 5.1 Delivery [1] Subject to the terms and conditions of this Agreement, delivery of the Aircraft shall take place on the Proposed Delivery Date…., unless Seller has reached an agreement with the Previous Operator for the earlier return of the Aircraft, in accordance with this clause 5.1, in which case Seller and Buyer hereby agree that such earlier date shall be the Proposed Delivery Date for the relevant Aircraft. [2] Seller and Buyer will use their reasonable endeavours to confirm (a) the early delivery date of the Aircraft and (b) the compensation amount referred to under sub-clause (iii) of this clause 5.1 by entering into a side letter to this Agreement not later than 30 calendar days from the date of execution of this Agreement (the 'Side Letter') In the event that the Seller succeeds in changing the re-delivery date (from Previous Operator) and the Proposed Delivery Date and the redelivery conditions in respect to the Airframe in accordance with the foregoing: (iii) the Buyer will pay to Seller a compensation amount equal to the rental amount that Seller, as lessor, would have received from the Previous Operator had the lease agreement with the Previous Operator in respect of the Aircraft not been terminated early. In no event shall the compensation amount exceed the amount of ….$300,000…per Aircraft…. " The "Proposed Delivery Date" was defined in the Agreement as follows: " 'Proposed Delivery Date' means, subject to cl. 5.1 hereof, 25 May 2009 with respect to Aircraft ….26964 and 25 November 2009 with respect to Aircraft….26963, or such other date as may be agreed in writing between the Seller and the Buyer as being the date on which Delivery is to occur. " As will be seen, the Issue turns on the construction of cl. 5 of the Agreement, to which I shall come. The facts were not (or not seriously) in dispute and may be shortly summarised: i) At the time the Agreement was negotiated, the Aircraft were on the TUI leases. The purpose of cl. 5.1 was to accommodate Avia's request that AerCap should seek to terminate the TUI leases ahead of schedule so as to facilitate early delivery under the Agreement. The purpose of cl. 5.1(iii) was to reimburse AerCap for rental foregone from TUI, in the event that the TUI leases were terminated early as Avia had requested. ii) The monthly rental under each of the TUI leases was US$220,000. Aircraft 1 was due to be redelivered by TUI on the 25 th November, 2009 and Aircraft 2 on the 25 th May, 2009 (so matching the original Proposed Delivery Dates under the Agreement). iii) On the 27 th November, 2008, AerCap and TUI agreed that the Aircraft would be redelivered early under the leases – Aircraft 1, on the 23 rd October, 2009 and Aircraft 2, on the 24 th April, 2009. iv) On the 5 th December, 2008 – so, outside the 30 day period specified in cl. 5.1 [2] of the Agreement – Ms. Browne sent an e-mail to Avia, attaching a draft side letter to Avia ("the draft side letter"). The draft side letter set out revised Proposed Delivery Dates, according with the early redelivery dates agreed under the TUI leases. Ms. Browne's covering e-mail asked Avia to review the draft side letter and for any comments it might have. Avia never responded substantively to this e-mail. v) Once it became clear that Avia would not be taking delivery of the Aircraft under the Agreement, AerCap successfully pushed back the redelivery dates of the Aircraft under the TUI leases. In the case of Aircraft 1, the redelivery date became the 16 th November, 2009 – so only 9 days before the original Proposed Delivery Date. In the case of Aircraft 2, redelivery in fact took place after the original Proposed Delivery Date. vi) The cl. 5 point accordingly concerns only the 9 days rental foregone in respect of Aircraft 1. If compensation is payable under cl. 5, there is no dispute that the amount due under cl. 5.1(iii), as a figure, is US$65,095.89. The issue on construction is simply outlined. Mr. Adair submits that AerCap's right to compensation for early termination is conditional upon Avia and AerCap agreeing the early delivery date and the amount of compensation by entering into a side letter not later than 30 days after the execution of the Agreement. He acknowledges that the drafting of cl. 5.1 is ambiguous but submits that if AerCap's entitlement to compensation is not thus conditional, then cl. 5.1 [2] serves no purpose and makes no commercial sense. He further submits that any doubt is dispelled when regard is had to the draft side letter. Its wording, he submits, makes it clear that the side letter is not merely confirmatory of an existing agreement; instead, an agreement on compensation is only to be concluded on execution of the side letter by both parties. Mr. Shah relies on the wording of the Agreement. Nothing in the express wording of cl. 5.1 makes AerCap's entitlement to compensation conditional upon the entry into a side letter within the time period specified in cl. 5.1 [2]; nor is there any basis for implying the existence of any such condition. The obligations under cl. 5.1 [2] are limited to the use of "reasonable endeavours" to "confirm" the early delivery date and the compensation amount. The wording "reasonable endeavours" in cl. 5.1 [2] is, Mr. Shah argues, inconsistent with the execution of the side letter being a condition of liability under cl. 5.1 (iii). I confess that, initially, I was considerably attracted to Mr. Adair's arguments. But, the more I have considered the Agreement, the more I am respectfully of the view that they are not well-founded. On Mr. Adair's own case, cl. 5.1 is ambiguous and not well-drafted. It is common ground that the entitlement to compensation under cl. 5.1 (iii) is not expressly made conditional on compliance with cl. 5.1 [2]. It follows that Mr. Adair's case can only succeed if wording is to be read into the Agreement or if cl. 5.1 [2] is to be treated as an implied condition precedent. To justify any such approach, in my judgment, it would be necessary to take the view that otherwise cl. 5 could not work or that cl. 5.1 [2] served no purpose and made no commercial sense. I am, however, unable to accept that this is so. As it seems to me, the scheme of cl. 5 is as follows: i) Delivery of the Aircraft under the Agreement was to take place on the Proposed Delivery Date/s, unless AerCap reached an agreement with TUI for an earlier return of the Aircraft from the TUI lease/s. If there was such an agreement between AerCap and TUI, then cl. 5.1 [1] is perfectly clear: the earlier return date for the relevant Aircraft was to become ("shall be"), without more, the Proposed Delivery Date. It is to be recollected that, on the uncontradicted matrix evidence, cl. 5.1 originated with a request by Avia for earlier delivery of the Aircraft if possible. ii) What remained was to inform Avia that there was to be an earlier delivery date under the Agreement and to work out the compensation due to AerCap for lost rental in accordance with cl. 5.1 (iii). The provisions of cl. 5. 1 [2] address these very points. iii) Plainly, though Avia had sought early delivery of the Aircraft, it was incumbent upon AerCap to inform Avia in a timely manner that such early delivery would take place and when. It is to be noted that the wording of cl. 5.1 [2] provides for AerCap to "confirm" the early delivery date; no further agreement was necessary. iv) As to compensation under cl. 5.1 (iii), no uncertainty was involved so that the clause was workable without prior agreement; but it was obviously desirable to avoid dispute as to the calculation. v) Against this background, the parties were to use "reasonable endeavours" to confirm the early delivery date and the amount of compensation by entering into a side letter "not later than 30 calendar days" from the date of the Agreement. vi) It would seem to me to follow that if AerCap did not use reasonable endeavours to enter into a side letter within the contractual time period, it would be in breach of contract – and liable in damages if any loss resulted. It is unnecessary to decide whether (and, if so, when) the time might be reached when notification to Avia would be so late that it would be entitled to refuse early delivery. That is not this case. But a liability on the part of AerCap in damages for breach of cl. 5.1 [2] falls well short of treating precise compliance with cl. 5.1 [2] as a condition precedent for the recovery of compensation under the clause. vii) Approached in this way, cl. 5.1 is workable; cl. 5.1 [2] serves a useful purpose and is anything other than devoid of commercial sense. This construction also accords naturally – and well – with the "reasonable endeavours" wording of cl. 5.1 [2]. It is unnecessary to take time over the construction of the draft side letter. I shall assume, without deciding, in Mr. Adair's favour that the draft side letter is to be construed as he submits. But even so, it is well-established law that the construction of a contract cannot turn on the subsequent conduct of the parties. Accordingly, the draft side letter sheds no light on the issue of construction I must decide and no more need be said of it. I therefore conclude that AerCap's late dispatch of the draft side letter and the fact that no side letter agreement had been entered into within the specified period in cl. 5.1 [2] did not disentitle it from claiming compensation under cl. 5.1 of the Agreement. It was not argued by Avia – doubtless because it could not have been argued – that Avia suffered any loss or damage by reason of the draft side letter being sent on the 5 th December rather than (say) the 15 th November. AerCap is accordingly entitled to compensation under cl. 5.1 of the Agreement in the amount claimed, viz., US$65,095.89 I record for completeness that Mr. Adair advanced further arguments under this heading which stood or fell with the Engines point. In the light of my decision on that point, no more need be said of these submissions. ISSUE (VI): QUANTUM (1) The AerCap claim in outline: In broad terms, AerCap claims damages in the amount of the difference between: i) The price it would have received for the Aircraft under the Agreement, had Avia performed its bargain, after maintenance adjustments and giving credit for the first two deposit payments; and ii) The amount it achieved when selling the Aircraft under the resale agreement. It may be noted that although the resale agreement was dated and became binding on the 3 rd March, 2010, the transaction was agreed by way of a Letter of Intent of the 28 th January, 2010. As will be seen, a good deal of the debate focussed on the value of the Aircraft in February 2010, in part because much of the expert work was done then and in part because of the resale of the Aircraft at around that time. It matters not whether the claim should proceed on the basis that the Engines or the actual engines were installed on the Aircraft at the time of the resale agreement; as emerges from a (corrected) table accompanying AerCap's closing submissions ("the table"), AerCap has chosen the lower of the relevant figures. As foreshadowed much earlier, the amount of this difference is US$7,254,178.24. To that figure there are to be added, first and in accordance with my earlier conclusion, the claim for compensation under cl. 5 of the Agreement in the amount of US$65,095.89. Secondly, as set out in the table, a claim for storage and insurance costs, in the total amount of US$112,972.47. The total sum thus claimed, excluding interest and costs, is US$7,432,246.60. To put it to one side, the claim for storage and insurance costs was ultimately not disputed. As the cl. 5 compensation claim has already been determined, it follows that the dispute under this Issue goes to the US$7,254,178.24, claimed by AerCap as representing its loss of bargain. (2) The rival cases: AerCap's case was straightforward. It had been seeking to re-market the Aircraft from January 2009 but had not been able to re-sell them prior to the resale agreement. There was thus no available market within s.50(3) of the Sale of Goods Act 1979 ("s.50(3)") until January 2010. Alternatively, AerCap was entitled to a reasonable period to go to the market before the market price was fixed. There was no allegation that AerCap had failed to mitigate and no allegation that the resale agreement was other than at arm's length. The price AerCap obtained for the Aircraft under the resale agreement evidenced - and was the best evidence of – the market price for February 2010. Given both the evidence of market price available from the resale agreement and the absence of any allegation that AerCap had failed to mitigate, the expert evidence was irrelevant. If that was wrong, then Mr. Seymour's evidence was to be preferred to the evidence given by Mr. Kairys. For Avia, Mr. Adair's closing submissions on this Issue proceeded as follows. AerCap was restricted to claiming damages in accordance with s.50(3), namely, the prima facie rule that the measure of damages was the difference between contract and market price at the date when the goods ought to have been accepted (i.e., the proposed delivery dates of 25 th May and 25 th November, 2009); AerCap's pleadings had not sought to displace that rule. Evidence had not been led and disclosure had not been given as to AerCap's efforts to re-sell the Aircraft between the 10 th February, 2009 (the date when AerCap accepted Avia's repudiatory and/or renunciatory breach of the Agreement) and entry into the resale agreement. It could not be assumed from the resale agreement that there was no market for the Aircraft prior thereto. The relevant market price was accordingly that prevailing in May and November 2009, rather than February 2010. Even on the evidence of the expert called by AerCap, Mr. Seymour, the market values for the Aircraft would have been significantly higher in May and November 2009 than in February 2010. If May and November 2009 market values were substituted, the AerCap claim would be reduced by more than US$3 million. Moreover, the resale agreement related to six aircraft, not simply the (two) Aircraft. " The value of this transaction might well have caused Aercap not to sell the Aircraft individually because selling six at once was more attractive. Equally a salesman may have earned a great deal more commission on a sale such as this rather than the sale of two aircraft." In any event, Mr. Seymour's valuation of the Aircraft was significantly under-stated; the Court was invited to prefer the considerably higher valuation, for February 2010, suggested by Mr. Kairys, the expert whose evidence was adduced by Avia. In the light of these rival contentions, it is convenient to consider the procedural history. (3) The procedural history: It is fair to say that the treatment of this head of claim in AerCap's Re-Amended Particulars of Claim – re-amended after the date of the resale agreement – is somewhat laconic. After pleading what AerCap lost under the Agreement, by reason of Avia's breach/es of contract, paragraph 18 of this pleading continued as follows: " As against the damages set out above, there fall to be set off: (1) the aggregate value of the Aircraft, which AerCap…believes to be …. US$21,608,210; ….. " The figure of US$21,608,210 represents the sum of the base sale prices obtained by AerCap for each of the Aircraft, under the resale agreement. Avia's Re-amended Defence and Counterclaim denied that AerCap had suffered the loss "particularised" in paragraph 18 of the Re-Amended Particulars of Claim. The Case Memorandum said nothing about this topic. The List of Issues said only this: " Is AerCap entitled to …. …Damages for breach of the Sale Agreement (and, if so, in what amount)? " It is noteworthy that Avia, at no stage, sought further information as to the basis of this AerCap claim. For instance, no particularisation was sought as to the basis for AerCap's belief that the aggregate value of the Aircraft was US$21,608,210; no questions were asked as to whether AerCap was contending that there was or was not a market for the Aircraft – and, if the contention was that there was a market, why the resale agreement was said to reflect it and why a resale price in early 2010 had been taken, rather than a market value at various points in 2009. On the face of it, those were obvious questions to ask, with a view to tying down AerCap's case. It is further noteworthy that Avia neither pleaded nor adduced evidence to the effect that AerCap had failed to mitigate its loss. Additionally, to the extent that there was factual evidence at the trial from AerCap witnesses on this topic (see below), Avia did not cross-examine at all. Avia's opening written submissions at the trial made no reference whatever to this area of the dispute. (4) The factual evidence: Perhaps unsurprisingly in the light of the procedural history, there was very little evidence on this part of the case. But evidence there was. First, Mr. Butler's witness statement, dated 15 th February, 2010, said this: " These remarketing activities [i.e., those commencing in January 2009] of course continued after AerCap's termination of the Sale Agreement on 10 February 2009. To date, AerCap's most encouraging prospect has been the letter of intent dated 28 January…. [2010]….although as at the date of signing this statement, this remains subject to Board approval of the potential purchaser." Secondly, in the course of his oral evidence, Mr. Den Dikken made the following observation: " You will also have seen that although we have actively marketed the aircraft, we did not actually manage to sell it to another party until a year later." I accept this evidence, which, as already underlined, was neither challenged nor contradicted. In these circumstances, any shortfall in disclosure (if shortfall there was) seems academic and was, in any event, not explored with the AerCap witnesses. (5) Discussion and provisional conclusion: I start with well-established legal principles. As to the measure of damages for non-acceptance of goods, s.50 of the Sale of Goods Act 1979 provides as follows: " (1) Where the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may maintain an action against him for damages for non-acceptance. (2) The measure of damages is the estimated loss directly and naturally resulting, in the ordinary course of events, from the buyer's breach of contract. (3) Where there is an available market for the goods in question the measure of damages is prima facie to be ascertained by the difference between the contract price and the market or current price at the time or times when the goods ought to have been accepted, or, if no time was fixed for acceptance, then at the time of refusal to accept." The rationale of s.50 is helpfully summarised in McGregor on Damages (18 th ed.), at para. 20-112: " The normal measure of damages, as stated in section 50(3) thereby incorporating the common law…., is the contract price less the market price at the contractual time for acceptance. This represents the amount the seller must obtain to put himself in the position he would have been in had the contract been carried out, since he can sell the goods in the market. If, however, there is clearly no available market, then, consequential losses apart, the damages will be assessed at the contract price less the value of the goods to the claimant at the time of breach, which value is likely to be based…..upon the price at which they are eventually sold by the claimant. " For present purposes, in determining whether there was an "available market" within the meaning of s.50(3), it suffices to refer to the observations of Webster J in Shearson Lehman v Maclaine [1990] 1 Lloyd's Rep. 441, at pp. 445-447, culminating as follows (at p.447): " …if the seller actually offers the goods for sale there is no available market unless there is one actual buyer on that day at a fair price….." While, for my part, I would prefer to focus on the period rather than the very day in question, those observations seem to me to capture the essence of the question, at least in this case. If the goods are offered for sale and there is no buyer at a fair price, it is difficult to conclude that there was an available market at the time in question. As further explained in McGregor , at para. 20-116, where there is an available market, the market price must generally be taken when assessing the seller's damages - rather than any price the seller might have obtained on a resale, if above or below the market price; thus a resale price cannot generally be used to increase or reduce the seller's damages, above or below the difference between the contract and market prices. Importantly however, where the market value is difficult to assess, then the resale price may be treated as evidence of the market price. S.50(3) focuses on the time for acceptance of the goods, i.e., the date of breach rule. For present purposes, two matters should be mentioned: i) Although the seller is required to make a substitute contract, the law gives the seller a reasonable period of time to make the substitute sale; the relevant market price for the purpose of assessing the quantum of the recoverable loss is the market price at the expiration of that period: The Golden Victory (supra) , at [17] and [34]. ii) Where the seller accepts the buyer's anticipatory breach as terminating the contract, the damages are still prima facie calculated at the time fixed for acceptance of the goods (i.e., the contractual delivery date) – but subject to a duty to mitigate on the seller's part: McGregor , at para. 20-119; Chitty on Contracts , (30 th ed.), Vol. II, at para. 43-412. Reverting to the facts, as earlier underlined, Avia has neither suggested that the resale agreement was other than at arm's length nor that AerCap has failed to mitigate its loss. I have recorded Mr. Adair's submissions as to the resale agreement. With respect, however, they are no more than assertions, involving speculation and lacking evidential foundation. It could equally be said with, if I may say so, rather more persuasive force that, as a matter of common sense, there was no motive for AerCap to delay a resale of the Aircraft or to resell at anything other than the best price it could obtain. In any event, I am satisfied on the AerCap evidence (set out above) that there was no failure to mitigate - that despite reasonable efforts AerCap could not have disposed of the Aircraft in advance of or at a better price than that obtained under the resale agreement. Having regard to the procedural history, Avia's case in this area is simply opportunistic. That said, if it is right in law, then regardless of its lack of merits, Avia is entitled to a reduction in the damages otherwise due to AerCap. I turn therefore to the nub of Avia's case: that AerCap is restricted to the s.50(3) measure of damages and that the relevant market price is that prevailing at earlier dates (May and November 2009). Is Avia's case right in law? In my judgment, it is not. First, given the procedural history, I am unable to accept that AerCap is confined to the s.50(3) prima facie rule. While AerCap's pleadings were, with respect, less than satisfactory, their very ambiguity left the matter open. If Avia wished to tie AerCap down, it could have done so very simply by a straightforward request for particularisation. Further, if Avia wished to challenge the existence or nature of AerCap's re-marketing efforts, the AerCap witnesses (in particular, Mr. Den Dikken and Mr. Butler) could have been cross-examined on this topic. As it is, I see no reason to hold, contrary to the evidence of AerCap's inability to sell the Aircraft, that there was an available market in May or November 2009. Secondly, it seems to me to follow that AerCap is entitled to base its loss of bargain claim on the difference between the contract (i.e., Agreement) price and the market price once there was a market price (in about February 2010). It is most unattractive to insist that AerCap's damages are limited by reference to a notional market price prevailing in May and November 2009 when, on the evidence, it was unable to obtain that price through no failing of its own. It is to be recollected that the law of damages seeks to do practical justice. Thirdly, there is in any event an alternative route to the same conclusion. If AerCap is to be strictly confined to the framework of s.50(3), then (as discussed above) it was entitled to a reasonable period of time within which to go into the market and the market price was that prevailing at the end of the period. Let it be assumed, in favour of Avia, that the period is taken as beginning at the 10 th February, 2009 – when AerCap accepted Avia's repudiatory and/or renunciatory breach as terminating the Agreement and so came under a duty to mitigate – rather than in May or November 2009, the Proposed Delivery Dates for Aircraft 2 and Aircraft 1 under the Agreement. Even so, in the absence of a case that AerCap had failed to mitigate, I would be prepared to hold that the period had not expired prior to the entry into the resale agreement in early 2010. While I confess to misgivings about a period of this length, if the alternative is to limit the damages by reference to an earlier notional market price unattainable in practice, then I know which conclusion I prefer. Fourthly, for the reasons already given, I am satisfied that the resale agreement did indeed reflect or evidence the market price for the Aircraft in or about February 2010. Fifthly, my provisional conclusion is that the AerCap damages claim for loss of bargain, based on the difference between the contract price under the Agreement and the market price as evidenced by the resale agreement, is well-founded. On this footing, the expert evidence as to valuation was irrelevant. But, at the very least de bene esse , I will consider the expert evidence before confirming or reconsidering this provisional conclusion. Sixthly, I would add only this. Mr. Shah approached the resale agreement as evidencing the market price under s.50(3). As it seems to me, it would have been open for him to contend that, there being no available market in May and November 2009 (and no case of a failure to mitigate), the price achieved by AerCap under the resale agreement reflected the value of the Aircraft to AerCap at the time of Avia's breach/es of contract, so laying the foundation for a relatively straightforward claim under s.50(2). As, however, I did not understand this argument to be advanced, I express no concluded view upon it. (6) Expert evidence and final conclusion: Mr. Seymour, called by AerCap had obvious expertise in aircraft valuation. As indicated in his reports, valuation involved a range of values rather than any more precise science. According to Mr. Seymour's evidence, the Agreement price for the Aircraft was in close accord with the then market price for Boeing 757-200 aircraft. Thereafter, over the period October 2008 – February 2010, the market value of aircraft generally – including Boeing 757-200 aircraft – "suffered a marked decline". Mr. Seymour concluded that, as of February 2010, the equivalent ("Half Life") value of each of the Aircraft was in the region of US$10,633,000; with maintenance adjustments, the value in February 2010 of Aircraft 1 (26963) was some US$11,135,000 and that of Aircraft 2 (26964) some US$9,113,000. It may be noted that the total of the values thus arrived at is US$20,248,000 – on the face of it, considerably less than the sum of the base sale prices achieved by AerCap under the resale agreement. Mr. Seymour reached his valuation figures on the basis that the actual engines were installed on the Aircraft; if, instead, it is assumed that the Engines were installed on the Aircraft, their total value is reduced by US$123,000, so making the price obtained under the resale agreement still more attractive. Still further calculations involving the Engines pointed to a greater reduction in Mr. Seymour's valuations but need not take up time here. For that matter, Mr. Seymour's observation was that the price under the resale agreement (he had admittedly only seen the LOI when writing his report) was "within the normal range I would expect from the appraised market value…..to an actual transaction value". Before coming to the substance of the views expressed by Mr. Kairys in his report, adduced by Avia, it is unfortunately necessary to underline a number of concerns relating to his evidence: i) First, the mode of his evidence. The expert evidence was scheduled for day 3 of the trial. Mr. Kairys did not travel from Lithuania to this country to give his evidence; this was on the ground of a physical injury, the details of which were and remained sparse. Having been apprised by Mr. Adair of this injury earlier during the trial, I encouraged efforts to be made to have Mr. Kairys' evidence given by way of video link. Those efforts, much assisted by AerCap bore fruit, so that a video link was available in Lithuania for Mr. Kairys to give his evidence on the day scheduled. Mr. Kairys, however, declined to attend for cross examination by video link. Such reasons as were given for his doing so were, to my mind, unsatisfactory but as I dealt with the matter fully in my ruling given on that day (day 3) of the trial, it is unnecessary to go over the same ground again here. Suffice to say that I declined an adjournment to an uncertain future date in the hope of Mr. Kairys attending Court then. However, if perhaps generously to Avia, I took the view that the proportionate solution was to treat Mr. Kairys' report as in evidence and to permit the parties to make submissions on that report. Necessarily, however, it follows that Mr. Kairys' evidence has not been tested in cross examination. ii) Secondly, the question of his independence or impartiality. It emerged from his report – though not made clear either by Mr. Kairys or Avia – that he had worked on previous occasions for FlyLAL (then operating under a different name). Further, the statement signed by Mr. Kairys makes no reference to his understanding of the CPR requirement that his duty was to assist the Court. iii) Thirdly, cutting and pasting . The industry of AerCap's legal team has demonstrated that Mr. Kairys' report includes substantial tracts of material "cut and pasted" from the internet. While in fairness to Mr. Kairys, he has listed a large number of sources at the beginning of his report, the manner of attribution employed in the body of his report was distinctly unsatisfactory. Much of the report is plainly not Mr. Kairys' own material but simply a verbatim quote from the work of others. iv) Fourthly, expertise . Though Mr. Kairys demonstrably has considerable experience of the industry – between 2002 and 2009 he was the Director of the Lithuanian Civil Aviation Authority – his expertise as a valuer is not self evident. Individually some of these matters may not have been of great moment. But, cumulatively, these matters do suggest caution when considering what weight should be given to Mr. Kairys' evidence. They would of course be put to one side if the substance of Mr. Kairys' report was such as to dispel any concerns. If anything, however, my reservations increased when regard was had to the substance of Mr. Kairys' evidence. i) Mr. Kairys' conclusion was that in February 2010, the value of each of the Aircraft was US$15.1 million. At least at first blush, this is a striking conclusion. Unless there is any reason to doubt that the Agreement price broadly reflected market prices in October 2008 (and there is no suggestion in the evidence to that effect), it would mean that the very downturn which formed the backdrop to Avia's own financial difficulties had only a most limited impact on the market value of the Aircraft. ii) In the body of his report, however, Mr. Kairys acknowledged that the "current economic downturn" had affected the values of all aircraft types and that "the deepest point of the current recession for aircraft values is expected to occur during the winter of 2009/2010". iii) This evidence tells against any suggestion of an upturn during the winter of 2009/2010 which could otherwise have gone to support Mr. Kairys' valuation. But while elsewhere in his report Mr. Kairys referred to a Russian forecast of growing demand for air transport, AerCap's research revealed that the forecast dated back to 2007, so preceding the recession – and at odds with the 9% drop in Russian passenger numbers in 2009 also recorded in the report. iv) Mr. Kairys sought, apparently, to rely in his report on two transactions involving Tajik Air and one involving a Lithuanian airline. These suggested high values for the aircraft involved. Mr. Kairys' report does not, however, indicate the source of his knowledge. His report contains nothing as to the condition of the aircraft in question; two of the three transactions appear to pre-date the current downturn; one of the aircraft was a 1999 manufacture – unlike the Aircraft which both date back to 1992; two of the transactions were finance leases. It is therefore very difficult to ascertain what, if anything, can be derived from these transactions. The overall effect of this evidence is to leave me with a feeling of scepticism as to Mr. Kairys' valuation of the Aircraft in 2010. Before, however, reaching any firmer conclusion, I turn to a number of specific points on which Mr. Seymour and Mr. Kairys took different views and which were raised with Mr. Seymour in cross-examination. i) As to lease rates, Mr. Kairys suggested a correlation between lease rates and aircraft valuation. For his part, Mr. Adair put to Mr. Seymour in cross-examination that he had over-emphasised low value sales and taken too little account of leasing activity in the market. Mr. Seymour fairly acknowledged the significant leasing activity in the market but denied that he had taken too little account of it. Mr. Seymour also underlined that lease rates vary due to a range of factors, including the credit risk of the airline in question. Extrapolating from lease rates to aircraft valuation is therefore a complex area; for instance, the fact that the same aircraft might be leased to one airline (say BA) for US$100,000 but to another (riskier airline) for US$200,000 cannot mean that the current market value of the aircraft will alter. ii) Mr. Kairys emphasised the significant volume of activity in the CIS region. Mr. Seymour accepted that this region did provide potential demand for used Boeing 757 aircraft but maintained that such demand was insufficient to compensate for the significant over-supply of Boeing 757s in the market. iii) Mr. Seymour was much pressed in cross-examination as to the 235 seat configuration of the Aircraft, the suggestion being that this configuration made the Aircraft more valuable than those with (say) 200 seat configurations. Mr. Seymour resisted the notion that the difference in configuration was "a big issue". Some operators would want one configuration; others would prefer a different configuration, depending on their passenger mix (for example, all economy or economy and premium class). Overall, as I understood Mr. Seymour's evidence, a change in configuration would not change the value of the aircraft by more than the value of the parts. More time need not be taken. On all these matters, I found Mr. Seymour's evidence both fair and persuasive. He was prepared to acknowledge such significance as he thought there was in the points raised by Mr. Kairys or in cross-examination, while giving a reasoned explanation for the views he took. By contrast, my misgivings as to the procedural and related questions concerning Mr. Kairys' evidence were anything but assuaged by the substance of his report. On the substance of their evidence alone, even without having regard to the other concerns attaching to Mr. Kairys' evidence, I have no hesitation in preferring the evidence given by Mr. Seymour to that contained in Mr. Kairys' report, where they differ. At all events, I am wholly unable to accept that Mr. Kairys' February 2010 valuation is in the right bracket or even close to it. It flies in the face of economic reality. It is unnecessary for me to consider whether Mr. Seymour's valuation of the Aircraft as of February 2010 requires any upward revision. On the facts, I see no reason not to accept the resale price – which is more favourable to Avia than Mr. Seymour's valuation – as providing the best evidence of the market price in February 2010. This consideration of the expert evidence has served, if anything, to reinforce my provisional conclusion. Accordingly, my final conclusion is that AerCap is entitled to claim damages for loss of bargain in the amount sought, namely US$7,254,178.24, based on the difference between the contract price under the Agreement and the market price as evidenced by the resale agreement. OVERALL CONCLUSION For the reasons given, the AerCap claim succeeds in the amounts set out above, while the Avia counterclaim fails and is dismissed. I shall be grateful to counsel for their assistance in drawing up an appropriate order and on all questions as to costs. BAILII: Copyright Policy | Disclaimers | Privacy Policy | Feedback | Donate to BAILII