Mrs Justice Moulder :
- This is the reserved judgment on the application of the first, second and third defendants (the "defendants") dated 22 March 2018 under CPR 11 for an order that the English court has no jurisdiction to try the claims brought by the claimant ("Airbus").
Background
- Airbus entered into a purchase agreement dated 31 October 2005 with Air One S.p.A ("Air One") for the sale and purchase of a number of Airbus A320-200 including the aircraft with the serial number 4249 (the "Aircraft") from Airbus. Following amendment, the purchase agreement is governed by English law with an ICC arbitration clause.
- In April 2008 Airbus, Air One and HSH Nordbank AG ("Nordbank") entered into a consent agreement whereby Airbus agreed to the partial assignment by Air One of certain rights under the purchase agreement to Nordbank as security for certain financing.
- By way of a novation agreement dated 23 December 2008 the purchase agreement was novated in part to Aircraft Purchase Fleet Ltd ("APFL") such that APFL became the buyer of 50 of the aircraft (such purchase agreement, as novated and as amended the "Purchase Agreement"). That agreement was expressed to be governed by English law with an ICC arbitration clause.
- In December 2008 Airbus, APFL and Nordbank entered into a consent agreement whereby Airbus consented to the assignment by APFL to Nordbank of certain of its rights under the purchase agreement relating to 15 aircraft.
- By an assignment agreement dated 8 July 2010 (the "Assignment Agreement") APFL assigned absolutely to Mainstream Aircraft Leasing Ltd ("Mainstream") certain rights under the Purchase Agreement including its right to take title to the single Aircraft and the benefit of the warranties given by Airbus pursuant to Clauses 12 and 13 of the Purchase Agreement. The Assignment Agreement was expressed to be governed by English law and had a submission to the jurisdiction of the English courts.
- Mainstream then entered into a sale and leaseback transaction with Jetstream Aircraft Leasing Ltd ("Jetstream"). Pursuant to a sale and purchase agreement dated on or around 8 July 2010 and a lease agreement dated on or around 8 July 2010 Jetstream purchased the Aircraft from Mainstream and leased it back to Mainstream.
- By a sublease agreement dated 6 July 2010, Mainstream agreed to sublease the Aircraft to Alitalia Compagnia Aerea Italiana S.p.A. ("Alitalia").
- Jetstream granted security over the aircraft under a security assignment dated 30 December 2008 entered into with Credit Agricole Corporate and Investment Bank ("Credit Agricole") acting as a security trustee pursuant to a facility agreement.
- On 8 July 2010 Airbus entered into an Airframe Warranties Agreement (the "Warranties Agreement") with Jetstream, Mainstream, Credit Agricole and Alitalia.
- On 29 September 2013 there was an incident when the Aircraft's right-hand landing gear failed to lower and the pilot was required to make an emergency landing with the landing gear partially retracted. The Aircraft sustained considerable damage. Although there was no loss of life an Italian court ordered Alitalia to pay around €30,000 in compensation to one of the passengers for injuries sustained.
- Alitalia was insured by the defendants (together the "Insurers"). The fourth defendant is understood to be insolvent and is not represented in these proceedings. Alitalia made a claim under its insurance policy for its loss. The Insurers paid the insurance claim and became subrogated to Alitalia's rights. The amount of the indemnity paid by the Insurers was in excess of US$11 million.
- On 24 July 2017 the Insurers started proceedings against Airbus in Italy (the "Italian proceedings"). However the fourth defendant has now discontinued its claim in the Italian proceedings and reference in this judgment to the "Insurers" shall be construed accordingly. The Insurers' claim is brought in tort under Article 2043 of the Italian civil code.
- On 9 January 2018 Airbus brought a claim in the English courts seeking declarations (at paragraph 28.1 and 28.2 of the Particulars of Claim) that the Italian proceedings fall within the scope of the exclusive jurisdiction agreement contained in Clause 13.2 of the Warranties Agreement. Airbus also sought declarations (at paragraphs 28.3 and 28.4 of the Particulars of Claim) that Airbus does not have any liability to the defendants for claims of alleged negligence and the defendants are limited to the remedies set out in Clause 12 of schedule 1 to the Warranties Agreement.
Evidence
- In support of the defendants' application challenging jurisdiction, the court had witness statements of Veronica Ganzitti dated 22 March 2018 and 10 May 2018 and of Enzo Fogliani dated 10 May 2018 and 13 September 2018.
- In response the court had evidence in the form of witness statements from Stefano Modenesi dated 19 April 2018 and 27 September 2018 and from Sophie Brophy dated 19 April 2018 and 8 October 2018.
Jurisdiction Clause
- Clause 13.1 of the Warranties Agreement provides that the agreement and any noncontractual obligations connected with it shall be governed by and construed in accordance with the laws of England. Clause 13.2 reads:
"The parties hereto irrevocably agree that the courts of England shall have exclusive jurisdiction to settle any disputes arising out of or in connection with this Agreement or any non-contractual obligations connected with it (including a dispute regarding the existence, validity or termination of this Agreement)."
Issues for the court
- It is the defendants' case that the jurisdiction clause in the Warranties Agreement (Clause 13.2) relates to disputes regarding the Warranties Agreement itself i.e. the mechanism by which the benefit of the warranties is transferred to persons who are not party to the Purchase Agreement and not to disputes regarding substantive rights and obligations under the Purchase Agreement.
- Even if the jurisdiction clause does extend to disputes between Airbus and Alitalia arising out of the warranties, it is submitted for the defendants that the jurisdiction clause in the Warranties Agreement does not extend to the tortious claim by the Insurers under the Italian civil code for the following reasons:
i) the claim which is advanced in the Italian proceedings is not a claim which is "connected with" the Warranties Agreement as it is not a claim which is within the scope of the warranty claim in particular because it is not a claim that the right hand actuator was defective;
ii) the Insurers could amend the existing pleadings in the Italian proceedings and advance an independent claim which is not based on subrogation to the rights of Alitalia.
Warranties Agreement
- Although the parties to the Warranties Agreement are Jetstream, Mainstream, Credit Agricole, Airbus and Alitalia, the immediate effect of the agreement is that Alitalia obtains the benefit of the warranties. Clause 3.4.2 reads:
"Each of the parties hereto hereby agrees in favour of [Alitalia] and [Airbus] that until receipt by [Airbus] of a notice in accordance with Clauses 3.1 or 3.2, [Alitalia] shall have the exclusive benefit of and shall be entitled to exercise all rights in respect of the Warranties."
- Prior to this agreement being entered into, Mainstream had the benefit of the warranties by virtue of the assignment from APFL. Clause 2 of the Warranties Agreement provides that Airbus will grant to Jetstream, Mainstream or Credit Agricole a package of warranties following service of a notice in accordance with Clause 3. Clause 2 provides:
"… [Airbus] agrees to grant by way of the Warranty Confirmation to any one of the Transaction Parties… as may be specified in any Notice duly served in accordance with Clause 3… a package of warranties equivalent to such of the Warranties which as at the date of the Notice shall remain available…"
"Transaction Parties" is defined to mean Jetstream, Mainstream and Credit Agricole. Clause 2 does not include Alitalia as a beneficiary of the Warranty Confirmation; Alitalia has the benefit of the warranties pursuant to Clause 3.4.2.
- Clause 3.1 provides that the right of Mainstream to receive the benefit of the remaining warranties is subject to receipt by Airbus of a notice duly executed by it. Such a notice would be given in the event that the sublease to Alitalia ended or was terminated. Clause 3.2 provides a similar condition for Credit Agricole or Jetstream to give notice in order to receive the benefit of the remaining warranties in circumstances where it was seeking to enforce its security upon a default.
Relevant law
- There was an issue between the parties as to the approach of the court to the jurisdictional question. It was common ground between the parties that the jurisdiction of the English court is engaged by Article 25 of Brussels Recast which provides for jurisdiction to be conferred by agreement. Further there is no dispute in this case that Clause 13.2 amounts to such an agreement. The issue between the parties is the scope of the agreement in Clause 13.2.
- Both counsel relied on Bols Distilleries BV v Superior Yacht Services Ltd [2006] UKPC 45 and Brownlie v Four Seasons Holdings [2017] UKSC 80. In particular the court was referred to a passage in the judgment of Lord Sumption at [7] in Brownlie where having referred to the principles set out by Waller LJ in the Court of Appeal in Canada Trust, he said:
"The reference to "a much better argument on the material available" is not a reversion to the civil burden of proof which the House of Lords had rejected in Vitkovice. What is meant is (i) that the claimant must supply a plausible evidential basis for the application of a relevant jurisdictional gateway; (ii) that if there is an issue of fact about it, or some other reason for doubting whether it applies, the court must take a view on the material available if it can reliably do so; but (iii) the nature of the issue and the limitations of the material available at the interlocutory stage may be such that no reliable assessment can be made, in which case there is a good arguable case for the application of the gateway if there is a plausible (albeit contested) evidential basis for it. I do not believe that anything is gained by the word "much", which suggests a superior standard of conviction that is both uncertain and unwarranted in this context."
- Counsel for the defendants submitted that the issue of construction of Clause 13.2 is a matter of law which is not dependent upon an issue of fact in respect of which the court is unable to make a reliable assessment.
- Nevertheless it seems to me that the test is not the civil burden of proof and the test is still that of a good arguable case as laid down in Canada Trust, that is that the claimant has the better of the argument on the material available. I note that Lord Sumption in Brownlie referring to Lord Goff of Chieveley in Seaconsar Far East stated at [6]:
"since Lord Goff considered that the evidential standard applicable to jurisdictional facts relevant to the availability of the gateway was derived from RSC Ord 11, r4 (2) ("no such leave shall be granted unless it shall be made sufficiently to appear to the court that the case is a proper one for service out of the jurisdiction under this Order"), he must also have thought that the standard was the same whether the jurisdictional fact in question would or would not be an issue at trial on the merits. I think that must be right, and equally true of the current rules, although the language of CPR 6.36, which limits the court's jurisdiction to cases falling within the gateways, is not precisely the same." [Emphasis added]
- However I also accept that what amounts to a "good arguable case" depends on what is required be shown in any particular situation in order to establish jurisdiction. As stated by Lord Rodger in Bols Distilleries at [28]:
"…The rule is that the court must be satisfied, or as satisfied as it can be having regard to the limitations which an interlocutory process imposes, that factors exist which allow the court to take jurisdiction. In practice, what amounts to a "good arguable case" depends on what requires to be shown in any particular situation in order to establish jurisdiction…" [Emphasis added]
- Insofar as the Insurers have the right to bring a non-subrogated claim that can be pursued in Italy, counsel for the claimant submitted that this did not mean the claims within the jurisdiction should not be brought in England. Counsel relied on Joseph "Jurisdiction and Arbitration Agreements and their Enforcement" at paragraph 2.34 that:
"if certain claims fall within and certain other claims fall outside the scope of the jurisdiction agreement, then the designated court will have jurisdiction pursuant to article 25 to determine the claims within the scope of the agreement. The remaining claims will be determined by courts having jurisdiction in accordance with the remaining rules of the Brussels 1 Regulation Recast… "
This proposition was not disputed by counsel for the defendant in oral submissions.
- As to the approach to the construction of the jurisdiction clause, the parties were agreed that the ordinary principles of construction apply. However counsel for the claimant relied on the the following extract from the judgment in Sebastian Holdings Inc v Deutsche Bank AG [2010] EWCA Civ 998 at [39] – [42]:
"[39] it is clear that in construing a jurisdiction clause a broad and purposive construction must be followed… Fiona Trust & Holding Corp v Privalov… where Lord Hoffmann observed…
'if, as appears to be generally accepted, there is no rational basis upon which businessman would be likely to wish to have questions of the validity or enforceability of the contract decided by one tribunal and questions about its performance decided by another, one would need to find very clear language before deciding that they must have had such an intention'.
[40] the Supreme Court emphasised in Re Sigma Finance Corp… the need, when looking at a complex series of agreements, to construe an agreement which was part of a series of agreements by taking into account the overall scheme of the agreements and reading sentences and phrases in the context of that overall scheme.
[41] it is generally to be assumed on these principles that just as parties to a single agreement do not intend as rational businessman that disputes under the same agreement be determined by different tribunals, parties to an arrangement between them set out in multiple related agreements do not generally intended a dispute to be litigated in two different tribunals.
[42] however where there are multiple related agreements, the task of the court in determining whether a dispute falls within the jurisdiction clauses of one or more related agreements, depends upon the intention of the parties as revealed by the agreements against these general principles…" [Emphasis added]
- Counsel for the defendants submitted that in order to determine the meaning and scope of the jurisdiction clause in the Warranties Agreement it is necessary to understand the role that the Warranties Agreement played in the "series of contracts" which led to Alitalia coming to operate the Aircraft.
Construction of Clause 13.2 of the Warranties Agreement
- The conflicting interpretations which are advanced are:
i) Clause 13.2 relates to disputes regarding the mechanism by which the benefit of the warranties is transferred to persons who are not party to the Purchase Agreement and not to disputes regarding substantive claims under the warranties; or
ii) Clause 13.2 applies to all disputes arising out of or in connection with the Warranties Agreement including substantive claims under the warranties.
- The court's task is to ascertain the objective meaning of the language which the parties have chosen to express their agreement. On the authorities this is not a literalist exercise focused solely on a parsing of the wording of the particular clause but the court must consider the contract as a whole and, depending on the nature, formality and quality of drafting of the contract, give more or less weight to elements of the wider context in reaching its view as to that objective meaning.
- Counsel for the defendants submitted that it was "perfectly possible" for a contract to be subject to one dispute resolution agreement while a separate agreement transferring rights or obligations under the first contract is subject to a different dispute resolution mechanism. He cited by way of example Rawlinson & Hunter Trustees SA v ITG Ltd [2014] EWHC 3764 (Ch). In that case the court upheld a loan agreement containing an English jurisdiction clause and a deed of novation which contained a Guernsey jurisdiction clause. It was submitted for the defendants that that authority was "an exact parallel with the present situation".
- On its face the language of Clause 13.2 is very broad and without limitation, applying to "any disputes arising out of or in connection with" the agreement. Counsel for the defendants pointed to the words in parentheses "including a dispute regarding the existence, validity or termination of this Agreement". However in my view the addition of this phrase introduced by the word "including" does not have the effect as a matter of construction of serving to limit the otherwise broad scope of the Clause. As noted above, construction is however not merely a matter of looking at the language used and the court considers the contract as a whole and the wider context.
- The Warranties Agreement sets out the warranties from Clause 12 and 13 of the Purchase Agreement in a schedule to the agreement. The defined term "Warranties" used in Clause 3.4.2 is defined as:
"the warranty rights in respect of the Airframe given by the Manufacturer to APFL pursuant to Clauses 12… and 13… of the Purchase Agreement, as set out in Schedule 1…"
- In my view the fact that the warranties are separately set out in schedule 1 suggests that the parties intended this agreement to be separate from the Purchase Agreement. In the Schedule the terms and conditions of the warranties and service life policy are set out in detail. Clause 12.1.1 contains the basic warranty. Clause 12.1.2 sets out the exclusions. Clause 12.1.3 sets out the warranty period and Clauses 12.1.5 and 12.1.6 the procedure for making a warranty claim. Clause 12.1.7 provides for the buyer to carry out repairs of warranted parts. Clause 12.2 sets out the period for which Airbus is responsible for a breakage or defect. Clause 12.4 deals with problems of an interface nature. Clause 12.5 contains a limitation on the scope of the liability of Airbus. The Warranties Agreement does not therefore merely cross refer to the Purchase Agreement but sets out in extenso a complete code for warranty claims. The fact that certain definitions used in the warranties in the Schedule require cross reference to the Purchase Agreement does not in my view negate the inference that the Warranties Agreement was to be regarded as a separate agreement having regard to the fact that this is the only contractual agreement between Airbus and Alitalia. I also take into account the fact that the Purchase Agreement was far more wide ranging in scope: in addition to the provision of the warranties, the Purchase Agreement dealt with the specification for the aircraft, the price and revisions to the price, the manufacturing procedure, the acceptance and delivery of the aircraft and training and product support. This supports an inference that the Warranties Agreement was a more narrowly focused and separate agreement dealing only with the warranties following delivery of this particular Aircraft.
- Clause 3.4.3 of the Warranties Agreement states:
"[Alitalia] agrees that the terms and conditions of Clauses 12 and 13 of the Purchase Agreement shall apply to any exercise of [Alitalia's] rights in respect of the warranties and shall be binding on [Alitalia], and [Alitalia] shall be subject to all obligations, restrictions, limitations and conditions of Clauses 12 and 13 of the Purchase Agreement with respect to the exercising of such rights (including without limitation, the waiver, release and renunciation in Clause 12.5 of the Purchase Agreement) to the same extent as if it had originally been a party to the Purchase Agreement until such time as any Notice has been served. [Emphasis added]
- It is unclear why if the Warranties Agreement was intended to operate as a separate agreement, it was thought necessary to add this additional provision. However even professionally drafted agreements are not always logically coherent and I note that this Clause 3.4.3 merely states that Alitalia is subject to the restrictions and conditions of Clause 12 and 13 of the Purchase Agreement with respect to the exercise of its rights in respect of the warranties. It does not state that Alitalia is subject generally to the restrictions and conditions of the Purchase Agreement in exercising its rights in respect of the warranties.
- Counsel for the defendants however submitted that by virtue of Clause 8.5, Alitalia takes the benefit of the warranties subject to the terms of the Purchase Agreement which he submitted, included the requirement in Clause 22.4 of the Purchase Agreement to submit disputes to arbitration.
- Clause 8 states:
"The parties hereby agree that Airbus will provide the Warranty Confirmation subject to the following conditions:
…
8.5 the Transaction Parties and [Alitalia] shall have no obligation or liability under the Purchase Agreement by reason of or arising out of this Agreement, provided that the terms and conditions of the Purchase Agreement shall apply to all claims made in respect of the warranties and shall be binding upon the Transaction Parties and [Alitalia] and the Transaction Parties and [Alitalia] shall be subject to all obligations, restrictions, limitations and conditions of the Purchase Agreement with respect to the making of such claim (including, without limitation, the waiver, release and renunciation in Clause 12 of the Purchase Agreement) to the same extent as if they had been named "Buyer" thereunder; "[emphasis added]
- To the extent that Clause 8.5 appears to be broader than Clause 3.4.3 in that it refers to the terms and conditions "of the Purchase Agreement" applying to all claims in respect of the warranties, I note that Clause 8 is concerned with provision of the Warranty Confirmation which is not provided to Alitalia and as such the conditions set out in Clause 8 (including Clause 8.5) do not apply to Alitalia since it will not be seeking the Warranty Confirmation and thus not required to comply with the conditions in Clause 8. Further the operative section of the Warranty Confirmation to be issued by Airbus (as set out in Schedule 3 to the Warranties Agreement ) states that:
"[Having acknowledged receipt of the notice] [Airbus] hereby confirms that, from the date hereof, the Remaining Warranties shall be made available to [the Lessor/the Security Trustee/Nominee/the Lessee] subject to the terms and conditions of the Airframe Warranties Agreement." [Emphasis added]
- To the extent that there is any inconsistency or uncertainty arising from the language of Clause 8.5, it seems to me that it is clear from Clause 3.4.3 that the express agreement from Alitalia was to be bound by the provisions of Clause 12 and 13 of the Purchase Agreement. As to the position in relation to the other parties, it seems likely that this was as expressly stated in the form of Warranty Confirmation (and consistent with the agreement of Alitalia in Clause 3.4.3) rather than the broader general language of Clause 8.5 given the matters discussed above concerning the separate nature of the agreement.
- Counsel for the defendants further submitted that a conclusion that warranty claims were subject to the jurisdiction of the English courts would run contrary to the provisions of Clause 8.4.
"8.4 nothing herein nor in the Warranty Confirmation shall modify in any way the rights of [Airbus] under the Purchase Agreement or subject [Airbus] to any liability, obligations, costs, losses, expenses or damages to which it would not otherwise be subject;" [emphasis added]
Counsel for the defendants submitted that the procedure for bringing proceedings in the English courts is different from the procedure in an ICC arbitration and thus would fall foul of Clause 8.4 as giving rise to different obligations such as disclosure and additional costs as for example in the Part 36 regime.
- In my view the Warranty Agreement does not "modify" the rights of Airbus under the Purchase Agreement. There is no contractual relationship between Airbus and Alitalia under the Purchase Agreement. The Warranties Agreement creates separate and independent rights and obligations as between Airbus and Alitalia. Accordingly Clause 8.4 cannot be interpreted to mean that Airbus will not be subject to any new liabilities or obligations by virtue of the Warranties Agreement. The effect of the Warranties Agreement is to create new rights in respect of the warranties in favour of Alitalia (and Jetstream) which do not have any such rights under the Purchase Agreement.
- It seems to me therefore that a rational and commercial construction is that Clause 8.4 means that the obligations assumed by Airbus under the Warranties Agreement namely the nature and scope of the warranties granted are consistent with the obligations assumed by Airbus under the Purchase Agreement in respect of the warranties but when the Warranties Agreement is read as a whole, Clause 8.4 is not to be read as incorporating into the Warranties Agreement all obligations, including the provisions for arbitration, under the Purchase Agreement.
- In his written opening submissions, counsel for the defendants submitted that the Warranties Agreement was "more accurately described" as the "airframe warranties assignment" (a reference which appears in the Alitalia lease agreement). Counsel for the defendants appeared to accept in oral submissions that the Warranties Agreement did not effect an assignment of the rights under the warranties held by Mainstream. Counsel submitted that the Warranties Agreement had the effect of granting the benefit of warranties to Alitalia and that those rights were no more than Mainstream had and should be construed as granting the same rights as the Purchase Agreement did for Mainstream.
- The legal nature of the Warranties Agreement is in my view significant particularly since counsel for the defendants sought to rely on cases of assignment in support of the proposition that the parties intended the jurisdiction clause to cover the issue of who was entitled to the benefit of the warranties but not the substantive rights themselves. Counsel for the defendants submitted that "the usual position" is that "absent contrary provision" where the benefit of a right in a contract containing an arbitration clause is assigned, substantive disputes about that right remain subject to the arbitration clause. Similarly he submitted that a third party who is entitled to enforce a substantive term of the contract under the Contracts (Rights of Third Parties) Act 1999 is treated as party to the arbitration agreement.
- I do not accept that this case is to be regarded as analogous to the position on an assignment or where third-party rights are being enforced through the statutory provision. In this case the Warranties Agreement does not effect an assignment. The submission that Alitalia's rights were no more than the rights of Mainstream does not reflect the legal character of the agreement as expressed in the language of the Warranties Agreement: the term "assignment" is not used and the language used in Clause 2 (albeit in the context of the Warranty Confirmation) uses the concept of "grant".
- Whilst in a given case as in Rawlinson & Hunter Trustees, the language may indicate that there was no intention to change the underlying position, as discussed above in this case the Warranties Agreement was in my view intended to create new rights and obligations and not to act as a vehicle to transfer the benefit of the rights in the Purchase Agreement.
- There is no clear rationale why the parties would choose in this case to split a substantive claim for breach of warranty from a claim as to whether or not a notice had been properly served such that the relevant Transaction Party was entitled to bring a claim for breach of warranty. I would not go so far as to accept the submission that such construction is absurd but viewed as a freestanding agreement, there is no apparent business purpose for such construction.
- Accordingly in my view the nature of the contract would suggest that Airbus is granting new rights to Alitalia by the Warranties Agreement and the reference in Clause 13.2 to "any dispute arising out of or in connection with the Warranties Agreement" extends to a dispute as to substantive rights under the warranties.
- It was submitted for the defendants that the court should have regard to the "series of contracts" which led to Alitalia coming to operate the Aircraft. It was submitted for the defendants that the Assignment Agreement contained an identical jurisdiction clause to that in the Warranties Agreement and set out the warranties in a separate schedule. That Assignment Agreement was executed at the same time as the Warranties Agreement and it was not argued for the claimant that the jurisdiction clause in the Assignment Agreement had the effect of making a warranty claim under the Assignment Agreement subject to the English courts rather than arbitration. Counsel for the defendants relied on Sebastian Holdings as an example where there were a series of agreements some of which provided for the jurisdiction of the English courts and one which provided for the jurisdiction of the courts of New York.
- However, as noted above, the Warranties Agreement is between a unique set of parties in the sense that Alitalia and Airbus are both parties to this agreement as well as Mainstream, Jetstream and Credit Agricole. Although Airbus consented to certain assignments, it was not a party to the assignment by APFL to Mainstream of the benefit of the warranties and Alitalia was not a party to the Purchase Agreement, the assignment by APFL or the sale and lease back transactions. Jetstream has no other contractual relationship with Airbus. In my view therefore whilst these other agreements are related in the sense that they show how the right to delivery of the Aircraft and the benefit of the warranties were transferred prior to the Warranties Agreement being entered into, these agreements do not form part of an overall scheme such that the Warranties Agreement should be construed in the context of those other agreements. In particular the Warranties Agreement is not linked to the Assignment Agreement and the Assignment Agreement is not to be regarded as forming part of a "series" in the sense that the court should interpret the Warranties Agreement by reference to the Assignment Agreement, notwithstanding the use of identical language. This was not for example, a case of a series of assignments of the benefit of a contract culminating in an assignment in the Warranties Agreement.
Conclusion on construction
- In my view for the reasons discussed above, the intention of the parties (applying the objective test) was that Clause 13.2 should apply to all disputes arising out of or in connection with the Warranties Agreement including substantive claims under the warranties.
Does the jurisdiction clause in the Warranties Agreement extend to the tortious claim by the Insurers under the Italian civil code?
Is the claim which is advanced in the Italian proceedings "connected with" the Warranties Agreement?
- It is the claimant's case that the right hand actuator is one of the "Warranted Parts" for the purposes of the Warranties Agreement. The Warranted Parts are defined as "any Seller proprietary component, equipment, accessory or part as installed on an Aircraft at Delivery of such Aircraft". By Schedule 1, Article 12.1.1 of the Warranties Agreement, Airbus committed itself to all warranted parts being free of defects. At the time of the incident, the Warranties Agreement was still in force. Thus it was submitted for Airbus that the claim put forward by the defendants is "connected with" the Warranties Agreement as it pertains to an alleged manufacturing defect of one of the components of the aircraft.
- The defendants' case (paragraph 38 of the first witness statement of Miss Ganzitti) is that their claim in the Italian proceedings is not brought for breach of any of the warranties but is based on the alleged failure of Airbus to take appropriate measures after manufacture of the Aircraft to ensure that the landing gear on the Aircraft was made safe.
- The defendants point to the fact that in their claim in the Italian proceedings they refer to the fact that the actuator component had suffered problems on other aircraft and that several previous incidents involving the same component had occurred. The Insurers assert that faced with these known problems, Airbus had failed to take appropriate steps to prevent the damage from recurring, they had not issued a recall of aircraft and had not tried to avoid recurrence of the problem by redesigning the component. The Insurers allege that Airbus ought to have made a fleet wide overhaul of the component and taken timely action to prevent recurrence of the problem.
- I note (paragraph 10 of Mr Fogliani's second witness statement) that Airbus sought to challenge the jurisdiction of the Italian court to hear the claim arguing that the Insurers' claim fell within the scope of the Warranties Agreement on the basis that it pertained to an alleged manufacturing defect of one of the components of the aircraft. I further note that according to Mr Fogliani, the Italian courts rejected this jurisdictional challenge on the grounds that the Insurers' pleadings did not necessarily rely on a manufacturing defect as reference was made to the presence of debris inside the actuator of the landing gear door and the failure on the part of Airbus to take the necessary measures to promptly address and solve the issue which had previously caused several identical incidents. Mr Modenesi, in his second witness statement, states that the judge stated that he required further evidence to properly consider the jurisdiction challenge and that there would be a further hearing in April 2019 to address, amongst other things, the jurisdictional challenge.
- The views expressed by the Italian court are not binding on me and in any event appear on the evidence not to represent a final decision on the issue. This court is therefore entitled and required to form its own view on the matter.
- The responsibility for maintenance of the Aircraft lies with Alitalia under its sublease. The problem with the actuator therefore cannot be a maintenance issue if it is to be laid at the door of Airbus. Notwithstanding the fact therefore that in the Italian proceedings, the Insurers cite a failure to prevent incidents from recurring, in my view the essence of what is alleged is a failure by the manufacturer namely Airbus to deliver an aircraft with a component which was not defective. Airbus would only be required to take steps to prevent incidents from recurring or to issue a recall of aircraft order to carry out a redesign of the component if as manufacturer it had a liability for what had occurred. Otherwise it seems to me that it would be an issue for Alitalia as the operator of the Aircraft. Clause 12.1.1 sets out the nature of the warranty concerning defects in material, in workmanship and in design. Clause 12.1.4 sets out the obligation of Airbus to repair/replace/correct the defective part.
Conclusion
- On the evidence before me in my view Airbus has established that it has the better of the argument that the Italian proceedings are noncontractual claims that are "connected with" disputes under the Warranties Agreement namely a warranty claim arising under schedule 1 and thus within Clause 13.2 of the Warranties Agreement.
The insurers could amend the existing pleadings and advance an independent claim which is not based on subrogation to the rights of Alitalia.
- The defendants filed their claim in the Italian proceedings based on their subrogation to Alitalia's rights (paragraph 9 of the first witness statement of Mr Modenesi).
- The defendants assert that they have the right to bring a direct action against Airbus in tort independent of their rights of subrogation and that this would be in any event outwith the jurisdiction clause in the Warranties Agreement.
- Although the Italian court has granted the defendants time to serve an additional pleading (paragraph 10 of the second witness statement of Mr Fogliani), as at the date of the hearing of this application no such independent claim has been brought.
- In my view this court cannot consider the hypothetical position of a claim brought by the insurers which is not brought by virtue of their rights of subrogation. This would require the court to assume the nature of the claim and the basis on which it is brought which is too imprecise and uncertain. However even if there was such an independent claim, this does not affect the position in respect of the subrogated claim: see Joseph cited above.
Conclusion
- For the reasons set out above I find that Airbus has the better of the argument:
i) that Clause 13.2 applies to all disputes arising out of the Warranties Agreement including claims under the warranties;
ii) that the claim for declarations sought at paragraphs 28.3 and 28.4 of the Particulars of Claim enforces rights agreed to in the Warranties Agreement and is within Clause 13.2;
iii) the Italian proceedings, to the extent that they are brought by way of subrogation to Alitalia's rights and obligations under the Warranties Agreement, are within the scope of the Warranties Agreement and as such the Insurers are bound by the jurisdiction agreement in Clause 13.2.
Addendum
- After the draft judgment was sent out to counsel in the usual way, counsel for the first to third defendants raised two points. The first concerned the submissions made by counsel as set out in paragraph 46 of the draft judgment. Having been provided with a note of the relevant exchange, I have amended paragraph 46 to reflect that exchange. I have also amended paragraph 48 of the judgment as a consequential change but the submission does not affect the overall reasoning as to the nature of the Warranties Agreement and no change has been made to the conclusion.
- The second point concerned an oral submission that, even if it was a condition of the insurers exercising rights of subrogation that they brought such a claim in England, they had not succeeded to Alitalia's obligations in the jurisdiction agreement and they were not liable to be sued in England. In my view where the insurers are exercising rights of subrogation, any legal obstacle applicable to the assured's right of action binds the insurer. The insurers are therefore bound by the jurisdiction clause.
