Spicejet’s appeal against judgment in favour of De Havilland is struck out by Court of Appeal

07/12/21

The Court of Appeal has today given its reasons for making an order pursuant to which an appeal by SpiceJet (India’s second largest domestic airline) against a judgment (“Judgment”) that it pay approximately US$43 million to De Havilland as liquidated damages for breaches of an aircraft purchase agreement be struck out. The Court of Appeal’s judgment provides useful guidance on its jurisdiction to impose conditions on an appeal under CPR 52.18.

SpiceJet was granted permission to appeal the Judgment at the hearing below addressing consequential issues on one ground concerning the effect of a contractual variation. Permission to appeal on the ground that the liquidated damages provision of the purchase agreement was an unenforceable penalty was refused; and permission to appeal on that ground was not sought by SpiceJet from the Court of Appeal. At the hearing below, De Havilland successfully resisted an application by SpiceJet for a stay of enforcement of the Judgment, but De Havilland did not seek the imposition of any conditions on the appeal.

SpiceJet failed to pay any of the Judgment sum and De Havilland applied to the Court of Appeal for an order under CPR 52.18(1)(a) that SpiceJet’s appeal be struck out unless it paid the Judgment sum (or part thereof) into court. Subsequently, in response to De Havilland’s enforcement proceedings in India, SpiceJet filed an objection which contended (among other things) that the Judgment was unenforceable as a matter of Indian law because the sum awarded as damages was “in the nature of a penalty”. De Havilland then sought to rely on that development in support of its application to the Court of Appeal.

CPR 52.18(3) provides that, where a party was present at the hearing at which permission to appeal was given, that party may not subsequently apply for an order that the appeal court exercise its power under CPR 52.18(1)(c) to impose a condition upon an appeal.

The Court of Appeal (Phillips and Nugee LLJ.) accepted in the light of previous authority that it had jurisdiction under CPR 52.18(1)(a) to make an order that effectively imposes a condition which would be impermissible under CPR 52.18(1)(c) where (as in the case before it) the respondent had been present at the permission to appeal hearing. However, the Court of Appeal emphasised that the discretion to impose such an order should be exercised with some care and having regard to the policy reasons underlying the CPR 52.18(3) restriction. In most cases, a material change in circumstances since the permission hearing would be required.

On the facts, the Court of Appeal found that De Havilland’s application as originally made would have been refused on the grounds on the grounds that it involved an attempt to re-open the question of whether a condition should be imposed on the grant of permission to appeal on grounds which were available at the hearing below, contrary to the purpose and policy behind CPR.53.18(3). However, the Court of Appeal concluded that there had been a change of circumstances since the hearing below which constituted a compelling reason to make an unless order under CPR 52.18(1)(a) (subject to whether SpiceJet could establish its appeal would be stifled by such an order) because SpiceJet was attempting in India to re-litigate the penalty clause issue. That was, in the Court of Appeal’s view, abusive because SpiceJet was not merely requiring De Havilland to go through proper processes to enforce the Judgment, but was seeking to obstruct and prevent that process by improper means. Moreover, the Court of Appeal concluded, that it was abusive for SpiceJet to seek to appeal one aspect of the Judgment in England whilst seeking to re-open another aspect of the Judgment in India in respect of which SpiceJet did not have permission to appeal and has not renewed its application for permission to appeal in England.

SpiceJet contended that an order requiring it to pay a sum of money into court would stifle its appeal. The Court of Appeal accepted that, given the evidence of SpiceJet’s current balance sheet deficit and lack of profitability, the question of stifling centred on whether Mr Ajay Singh, Spicejet’s chairman and majority shareholder, could and would assist SpiceJet by funding the payment required by any unless order. On the evidence before it, the Court of Appeal concluded that SpiceJet could reasonably expect Mr Singh to provide some funding to pursue the appeal. The Court ultimately ordered SpiceJet to pay £5 million into court, having regard to what SpiceJet (with the assistance of Mr Singh) could be expected to pay in light of the prospects of the appeal. SpiceJet subsequently failed to pay that sum, with the result that SpiceJet’s appeal has been struck out.

The judgment is here.

The press summary in relation to the judgment earlier this year is here.