Background
FW Aviation (Holdings) 1 Limited sought substantial sums arising from VietJet Aviation Joint Stock Company’s leasing of four Airbus A321 aircraft—two New Engine Option aircraft and two Current Engine Option aircraft—under Japanese Operating Lease with Call Option structures. After VietJet missed rental payments during the COVID-19 pandemic, termination notices were issued in October 2021. Earlier judgments, affirmed on appeal as to liability, established that the leases and subleases had been validly terminated and determined termination payments of approximately $181.5 million, in addition to pre-termination amounts.
This third trial addressed remaining quantum issues, including the aircraft’s condition on return, the costs of repair, maintenance, storage, regulatory compliance and export, lost rental income, and enforcement expenses. VietJet handed over the aircraft in December 2022 on an “as is, where is” basis, but their export from Vietnam was substantially delayed. Because FWA had acquired the relevant “Excluded Property” rights only for the two NEO aircraft, several contractual claims were available for those aircraft but not for the CEOs.
The Court’s Holding
Mr Justice Birt held that, under clause 20.4, FWA could recover only costs actually incurred in bringing the NEO aircraft toward the contractual return condition. Recoverable items included $371,859 in agreed costs, $5,327,503.87 for an engine shop visit, specified repair and parts costs, $538,095.64 for lost maintenance and component utility, and other allowed project-management, storage, regulatory, insurance and engine-stand expenses. Alternatively, FWA could recover the diminution in value between the NEO aircraft as returned and their value in the required return condition, subject to adjustments prescribed by the court.
The court also awarded lost rent on the NEO aircraft from 16 December 2022 through 22 May 2025, at $324,000 per month for MSN 8906 and $305,200 per month for MSN 8937. It rejected FWA’s claim for other legal and enforcement costs because FWA had not produced sufficient evidence that the costs fell within the contractual indemnities or were reasonably incurred. VietJet’s $487,188 counterclaim concerning two engine stands failed for circuity of action because any recoverable charge for their use would itself have been indemnifiable by VietJet. Some final amounts remained to be calculated by agreement or determined at a consequential hearing.
Key Takeaways
- An indemnity for restoring aircraft to contractual return condition covered costs actually incurred, not hypothetical future expenditure.
- FWA recovered substantial NEO-aircraft losses, including repair-related costs and lost rent, but its rights differed between the NEO and CEO aircraft because it had not acquired the relevant Excluded Property for the CEOs.
- A claimant seeking contractual reimbursement of legal or enforcement expenses must prove what work was performed, why it falls within the indemnity and that the expense was reasonable; redacted invoices and high-level descriptions were insufficient.
Why It Matters
The judgment illustrates how assignments and excluded-property provisions in complex aircraft-financing structures can determine which losses a successor may recover. It also distinguishes between an indemnity for expenditures actually made and an alternative damages measure based on diminished asset value.
For commercial litigants, the decision underscores that even broadly worded enforcement indemnities do not eliminate evidentiary requirements. Detailed, admissible proof of the nature, contractual basis and reasonableness of professional costs should be presented at the quantum trial rather than deferred to a later costs assessment.