In a recent case in the Technology and Construction Court, useful guidance was given on how the courts would assess damages in the event that a claimant’s quantification of damages was unopposed by the defendant.

The case concerned a claim for damages arising from a contract between an operator of freight aircraft (“Transafrik”) and an aviation technical consultancy (“Venus”). In June 2005, a Hercules aircraft leased by Transafrik landed heavily on a remote airfield in Northern Kenya sustaining serious damage. Venus was initially engaged by Transafrik to inspect the aircraft and then prepare a damage assessment report. Venus advised Transafrik that the aircraft could be economically repaired and in turn offered its own services to undertake the remedial works.

A contract was agreed between the parties in which Venus undertook to accomplish the repairs by 31 May 2006. In doing so, it was obliged to obtain approvals from various aviation authorities, issue a certificate of conformity that the work had been undertaken in accordance with the manufacturer’s maintenance manual and to certify that the repairs had been carried out by appropriately experienced and licensed engineers. According to Transafrik, Venus had failed to comply with any of these requirements, despite having been paid substantial sums in advance payments.

In an earlier judgement in the TCC, Mr Justice Ramsay decided that Venus was in breach of contract but deferred the assessment of damages until further information had been supplied. Venus failed to comply with two court orders for the production of this information. Furthermore, they failed to appear before Mr Justice Akenhead for the hearing convened to consider the assessment of damages.

Transafrik sought damages under two heads of claims, namely $150,000 per month in net loss revenue from July 2006 until the date of the court judgement and also a sum of $5,000,000 in respect of the diminution in the value of the aircraft.

In regard to the claim for net lost income, Transafrik had computed their costs on the basis of a budget prepared for the year 2006 for that particular aircraft. The numbers make surprising reading. Estimated gross monthly income of nearly $420,000 would be partially offset by direct costs of $270,000, leaving a gross monthly operating profit of about $150,000. Transafrik was able to convince the court that income of this level could have been achieved in its contract with the United Nations World Food Programme to supply food and other supplies to stricken areas of Africa.

In regard to their claim for a diminution of value, Transafrik said that they were obliged to the owners of the aircraft, under the terms of the lease, to deliver back the aircraft at the end of the lease period in the same working order and condition as at the beginning of the lease period. They argued that the estimated cost of repairs was such that it was entirely uneconomic to put the aircraft back into service. They assessed the diminution of value on the basis of the insured value of $5,000,000 which compared favourably with the price of similar aircraft sold by Transafrik in 2004.

In consideration of these claims, Mr Justice Akenhead set out the following rules for the assessment of damages:

1. The burden of proof in the assessment of damages rests with the claimant.

2. Where the assessment of damages is unopposed by the defending party, “…the court will not simply rubber stamp…” the claimant’s assessment.

3. Irrespective of whether the claimant’s assessment of damages is opposed or unopposed, “…the court may critically examine the evidence and arguments…” advanced by the claimant.

4. Where the assessment of damages is unopposed, the court will critically consider that assessment but with the overriding objective of minimising costs of the assessment.

In applying these guidelines, Mr Justice Akenhead awarded Transafrik $109,000 per month for net lost revenue. In arriving at this reduced amount, he examined the evidence led by Transafrik and concluded that their quantification of damages had failed to take account of indirect running costs.

As for the diminution of value, the judge awarded Transafrik the sum of $5,000,000 on the basis that the liability to the owners would be the market value of an airworthy aircraft which he estimated would be in the order of $7,000,000 but that could be partially offset by a salvage value of $2,000,000.

- Alex Warrender