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England and Wales High Court (Commercial Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Various Airfinance Leasing Companies & Ors v Saudi Arabian Airlines Corporation  EWHC 3787 (Comm) (29 December 2020)
Cite as:  EWHC 3787 (Comm)
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BUSINESS AND PROPERTY COURTS
OF ENGLAND AND WALES
COMMERCIAL COURT (QBD)
London, EC4A 1NL
B e f o r e :
| (1) VARIOUS AIRFINANCE LEASING COMPANIES
(2) ALIF SEGREGATED PORTFOLIO COMPANY & Ors
|- v -
|SAUDI ARABIAN AIRLINES CORPORATION
|INTERNATIONAL AIRFINANCE CORPORATION
||Intended Third Party
Official Court Reporters and Audio Transcribers
5 New Street Square, London, EC4A 3BF
Tel: 020 7831 5627 Fax: 020 7831 7737
MR C. BÉAR QC, MR G. ROBERTSON and MR J. BARNES (instructed by Norton Rose Fulbright) appeared on behalf of the DEFENDANTS.
Crown Copyright ©
MR JUSTICE FREEDMAN:
"Each of the parties acknowledges the confidential and sensitive nature of this Lease and the terms contained herein and the transactions contemplated hereby and agrees not to disclose to any third party (other than their auditors and respective professional advisors, or to any Affiliates, Owner, Affiliates of Owner or Lessor Lender and their respective professional advisors or Lessor's potential purchasers, lenders or investors in respect of any potential sale, financing, refinancing of or related to the Aircraft and/or transfer or assignment of this Agreement or any right or interest therein, and except as otherwise required by Applicable Law) any non-public, proprietary information provided by and concerning the other party which the other party specifies as being of a sensitive and confidential nature without the prior written consent of such party."
Background to the application
"Reuters understands that based on documents we have obtained - that Saudi Arabian Airlines is being sued by Alif Segregated Portfolio Company in a London Commercial Court. Alif Segregated Portfolio Company claims Saudia has breached several clauses of lease agreements for 50 Airbus aircraft (ordered in 2015). Alif is suing Saudia for $461 million in unpaid rent and maintenance fees. The company also claims further damages, costs and interests. Alif said Saudia had failed to pay basic rent after seeking to reduce its amount and engaged in unauthorized engine and part swaps."
"I am a Reuters correspondent covering the Gulf region. We have a story on a lawsuit filed against Saudi airlines Saudia in a London commercial court from Alif fund over the lease of 50 Airbus aircrafts. Alif Segregated Portfolio Company is claiming Saudia was in breach of various clauses of lease agreements of the 50 aircrafts bought from Airbus in 2015.
Alif is suing Saudia for the alleged breaches including for around $461 million in unpaid rent and maintenance cost, along with further damages and interest.
Alif said in the court documents -- seen by Reuters -- Saudia has failed to pay basic rent after seeking to reduce its amount and engaged in unauthorized engine and part swaps.
Could you confirm that you represent Saudia in this case? Would you like to make a comment on behalf of your client?
We obviously welcome any other information that you would provide [to] us to balance our coverage."
"Saudia will stand by its contractual commitments, and is also prepared to defend itself against inaccurate claims. Saudia will not comment on the specific details of this matter but would emphasise that active legal proceedings have not commenced. We are currently in discussions with the lessor to resolve contractual differences, and we believe that common sense will prevail in the end. We have no further comment at this stage."
Sources have said [REDACTED] was conditioned with a restructuring process and the review of some contracts, including with Alif and Rolls-Royce's maintenance contract. The source said the review of the company's contracts is linked to a potential takeover by the PIF."
There were then various questions that were asked with a view to having confirmation about the receipt of these amounts and their purpose, and how they were to be treated. It was also asked:
[REDACTED] What is the reason for this move? Is it a sign that the PIF is planning to list or privatise Saudia?"
"The finance ministry approved a payment of 13.6 billion riyals ($3.6 billion) for Saudia in 2019, and a further 6.4 billion riyals in the first half of this year, according to the documents reviewed by Reuters."
It was stated that the amounts were labelled as "government compensation". It referred to other information relating to a loan provided by Saudi Arabia's wealth fund. It also referred to this action in the High Court, and said that that was a claim over:
"... an alleged breach of the agreement, Saudia asked for a 20% cut in the agreed rent and the cancellation of a government guarantee clause, court documents showed."
(1) [REDACTED] Further, the reference to [REDACTED] is a reference [REDACTED] to which reference has been made.
(3) The reference to the [REDACTED] appears to come from the without prejudice letter referred to above of 9 April 2020.
(4) The reference to the [REDACTED] appears to come from the [REDACTED] sent in a without prejudice letter from Saudia's solicitors to the IAFC parties' solicitors, under cover of a letter dated 28 October 2020.
(1) Saudia's case is based on inference, and say that there is no legitimate inference to be drawn, and that it is entirely speculative. Saudia say that it would be expected that their case would be based on inference but they submit that the inferences are strong enough for an interim injunction at this stage.
(2) Others have had access to [REDACTED] information. Saudia says that that is true to an extent in respect of the [REDACTED] but it is not correct as regards the [REDACTED]. It is also inapplicable as regards the without prejudice correspondence.
(3) The security trustee has had access to the [REDACTED]. Saudia's answer to that is that in practice the [REDACTED] have not been sent to the security trustee: see Mr Bafaqeeh's statement, para.26. The security trustee's role is administrative and it is submitted that they would have no reason to leak the information: see Mr Bafaqeeh's statement, para.55(g).
(4) The Reuters' article contains a number of general statements relating to Saudia's financial position, which is a matter of public record. Saudia responds by saying that that was not the case, and the information in relation to, for example, [REDACTED] Saudia submits that it is telling that neither of the King & Spalding letters put forward a positive explanation as to how the without prejudice material might have ended up in Reuters' hands. Saudia also relies upon the express reference in Reuters' article to seeing court documents and to the October article being written having seen the claim form, despite its not being available at that stage.
The obligations of confidence
"28 The overall framework will be familiar to the Court and is summarised in the White Book at 6.37.13. The applicant must show (internal references omitted):
(a) that there is a good arguable case that the claim against the foreign defendant falls within one or more of the heads of jurisdiction for which leave to serve out of the jurisdiction may be given as set out in para.3.1 of PD 6B;
(b) that, in relation to the foreign defendant to be served with the proceedings, there is a serious issue to be tried on the merits of the claim;
(c) that in all the circumstances (a) England is clearly or distinctly the appropriate forum for the trial of the dispute (forum conveniens), and (b) the court ought to exercise its discretion to permit service of the proceedings out of the jurisdiction.
29 No jurisdictional issue arises in relation to Saudia's counterclaim against the Claimants, who are existing parties to the proceedings.4 As against IAFC, however, Saudia must obtain permission under CPR Part 6.36.5
30 For IAFC:
(a) Saudia can, at the least, rely on PD6B para. 3.1(4), because IAFC is a necessary or proper party to its counterclaim depends the Claimants (being the entity most likely to have disclosed the information).
(b) There is authority that an agreement to conduct negotiations 'without prejudice' extends also to bind any connected parties: see Instance Printing v Denny, para.25(d) above. Saudia can therefore rely on the contractual gateways.
(c) Saudia has an additional argument. As noted above, IAFC was a party to the Term Sheets originally executed in 2015 which provided for English law and 'London courts'. Moreover, it was initially a party to the Leases with Saudia (which have English governing law and jurisdiction clauses: cl. 20(b) [AB1/116-118]), as each Aircraft was delivered, the Leases were novated, with a Lessor taking IAFC's place as Lessor. However, Saudia suggests the jurisdiction and governing law agreements survive. On ordinary principles such terms are separate to the contract as a whole.6 Although the deeds of novation provided at clauses 3.1 and 3.2:
3.1 The Original Lessor and the Lessee hereby release each other from their obligations under the Lease Agreement as from the Effective Date, save as provided in clause 4 (Pre-existing claims)
3.2 The Lessee releases and discharges the Original Lessor from all future claims and demands whatsoever in respect of the Lease Agreement and accepts the liability of the New Lessor under the Lease Agreement from the Effective Date,
clause 4 of the deeds of novation maintained 'Pre-Existing Claims':
Nothing in this Deed shall affect or prejudice any claim or demand whatsoever which either the Original Lessor or the Lessee may have against the other relating to matters arising prior to the Effective Date.
The jurisdiction and governing law clauses in the Leases thus continue to have effect, on any view, for 'Pre-Existing claims'. Saudia relies on the presumption in Fiona Trust re Privalov  Bus LR 1719 against attributing to reasonable parties an intention that there should be multiple sets of proceedings (see paras.26-28). It is also relevant that (i) the Deeds of Novation were themselves governed by English law, and (ii) that IAFC is the 'Servicer' in each Lease (and would therefore post-novation continue to have a role in an English-law governed contract). Given all that, Saudia suggests that the original Leases and/or the Deeds of Novation should be construed so that the jurisdiction and governing law clauses to which IAFC originally agreed continue to apply to it in relation to the Leases as novated.
(d) In relation to Saudia could thus rely on PD6B para. 3.1(6)(c) and (d) based on either the agreement to conduct WP negotiations, the Term Sheet or the Leases.
31 As a further basis, the tort claims against IAFC, like a breach of confidence claim in equity under gateway (21), found jurisdiction if the harm is sustained within the jurisdiction. The purpose of Rs in leaking the information is to be explained precisely by a motivation to cause Saudia embarrassment, and thereby to put pressure on it to come to terms in the underlying proceedings. The detriment sustained by Saudia includes detriment to its conduct of the proceedings and of any negotiations. Such detriment is sustained in England.
4 No permission is required to serve a counterclaim: White Book, 6.36.1.
5 'Claim form' is not limited to claim forms in the normal sense: see White Book 6.37.2 referring to CPR Part 6.2(c):
'claim' includes petition and any application made before action or to commence proceedings and 'claim form', 'claimant' and 'defendant' are to be construed accordingly'
6 See e.g. Brussels I Recast regulation EU 1215/2012 reg.25(5)."
"32 To establish the application of English law:
(a) As against the Lessors, Saudia relies on the governing law clauses in the Leases and Mediation Agreement.
(b) English law is also obviously the governing law of any agreement to engage in 'without prejudice' communications in the context of actual or prospective English court proceedings.
(c) As against IAFC, Saudia relies on the governing law clause in the Leases (on the basis explained above) and the Term Sheets.
(d) In the alternative against IAFC, and as against the Portfolio Companies, the Rome II Regulation (Regulation (EC) 864/2007) applies. (That regulation will with immaterial changes be preserved after 31 December 2020.) Within Rome II's framework:
(i) Saudia suggests the relevant provision is Article 4 (which gives the general rule). Article 4 provides:
1. Unless otherwise provided for in this Regulation, the law applicable to a non-contractual obligation arising out of a tort/delict shall be the law of the country in which the damage occurs irrespective of the country in which the event giving rise to the damage occurred and irrespective of the country or countries in which the indirect consequences of that event occur.
3. Where it is clear from all the circumstances of the case that the tort/delict is manifestly more closely connected with a country other than that indicated in paragraphs 1 or 2, the law of that other country shall apply. A manifestly closer connection with another country might be based in particular on a pre-existing relationship between the parties, such as a contract, that is closely connected with the tort/delict in question.
(ii) The 'country in which the damage occurs' is not easy to identify in a breach of confidence case, and there does not appear to be authority on the point. Dickinson in 'The Rome II Regulation: The Law applicable to Non-Contractual Obligations' identifies it as the state where 'the confidentiality of the claimant's information was first, compromised and diluted by the defendant's actions' - presumably, therefore, Dubai (where IAFC and Reuters' journalists both are) - but goes on to observe: '[T]hat, in a case such as this, the location ... may provide only a tenuous connection to the tort/delict is again to be taken into account in applying the Art 4(3) "escape clause" ...' (para.4.68).
(iii) Saudia suggests, however, that the pre-existing relationships between the parties indicate that England is manifestly more closely connected to the tort than Dubai. As noted above, the Leases are all governed by English law. Even though they are not parties, the Portfolio Companies have sued on those Leases and are plainly closely connected to them. Further, the disclosure of confidential information appears intended to influence the settlement or outcome of that English litigation. Compared to that, Saudia suggests the location of the Reuters journalists is a substantially weaker factor.
(e) Saudia accepts that in a number of decided cases, Article 6 of Rome II (on unfair competition, giving jurisdiction to the market affected) has been applied to commercial claims of breach of confidence. But here Saudia is not competing with the IAFC Parties, and the interests addressed by Article 6 do not apply.
(f) Alternatively, if Article 6 does apply in principle, Saudia suggests that the acts in question exclusively affect a single competitor (Saudia) and thus under Article 6(2), Article 4 applies in any event.7
33. Saudia therefore satisfies the 'good arguable case' test which applies in relation to meeting the gateways under PD6B. As to the other elements of the overall jurisdictional decision, these are addressed below.
7 Any alternative analysis leads to the unpalatable conclusion that, because of Article 6(4), Saudia and the IAFC Parties are forbidden from determining for themselves what law would apply to the non-contractual obligations between them. But if Article 6(1) does apply, then the 'competitive relations' and (on the basis that Saudia is a 'consumer', the 'collective interests of consumers') are located in the Kingdom of Saudi Arabia. For present purposes, Saudia would then rely on the presumption that foreign law is the same as English law."
Application for interim injunction
"Freedom of expression.
(1) This section applies if a court is considering whether to grant any relief which, if granted, might affect the exercise of the Convention right to freedom of expression.
(2) If the person against whom the application for relief is made ('the respondent') is neither present nor represented, no such relief is to be granted unless the court is satisfied—
(a) that the applicant has taken all practicable steps to notify the respondent; or
(b) that there are compelling reasons why the respondent should not be notified.
(3) No such relief is to be granted so as to restrain publication before trial unless the court is satisfied that the applicant is likely to establish that publication should not be allowed.
(4) The court must have particular regard to the importance of the Convention right to freedom of expression and, where the proceedings relate to material which the respondent claims, or which appears to the court, to be journalistic, literary or artistic material (or to conduct connected with such material), to—
(a) the extent to which—
(i) the material has, or is about to, become available to the public; or
(ii) it is, or would be, in the public interest for the material to be published;
(b) any relevant privacy code.
(5) In this section—
'court' includes a tribunal; and
'relief' includes any remedy or order (other than in criminal proceedings)."
"18. What is to happen meanwhile? Confidentiality, once breached, is lost for ever. Parliament cannot have intended that, whatever the circumstances, section 12(3) would preclude a judge from making a restraining order for the period needed for him to form a view on whether on balance of probability the claim would succeed at trial. That would be absurd. In the present case the Echo agreed not to publish any further article pending the hearing of Cream's application for interim relief. But it would be absurd if, had the Echo not done so, the court would have been powerless to preserve the confidentiality of the information until Cream's application had been heard. Similarly, if a judge refuses to grant an interlocutory injunction preserving confidentiality until trial the court ought not to be powerless to grant interim relief pending the hearing of an interlocutory appeal against the judge's order.
22 In my view section 12(3) calls for a similar approach. Section 12(3) makes the likelihood of success at the trial an essential element in the court's consideration of whether to make an interim order. But in order to achieve the necessary flexibility the degree of likelihood of success at the trial needed to satisfy section 12(3) must depend on the circumstances. There can be no single, rigid standard governing all applications for interim restraint orders. Rather, on its proper construction the effect of section 12(3) is that the court is not to make an interim restraint order unless satisfied the applicant's prospects of success at the trial are sufficiently favourable to justify such an order being made in the particular circumstances of the case. As to what degree of likelihood makes the prospects of success 'sufficiently favourable', the general approach should be that courts will be exceedingly slow to make interim restraint orders where the applicant has not satisfied the court he will probably ('more likely than not') succeed at the trial. In general, that should be the threshold an applicant must cross before the court embarks on exercising its discretion, duly taking into account the relevant jurisprudence on article 10 and any countervailing Convention rights. But there will be cases where it is necessary for a court to depart from this general approach and a lesser degree of likelihood will suffice as a prerequisite. Circumstances where this may be so include those mentioned above: where the potential adverse consequences of disclosure are particularly grave, or where a short-lived injunction is needed to enable the court to hear and give proper consideration to an application for interim relief pending the trial or any relevant appeal."
"Lord Nicholls explained that there may be exceptional cases where the court may depart from this general approach. The Claimants accept for the purposes of this hearing that the general rule in  of Cream Holdings applies and that they need to satisfy the court that they are more likely than not to obtain a permanent injunction at trial."
Form of Order
"(a) the identity of each and every journalist, press or media organisation, press agent or publicist or any other third party with a view to publication in the press or media or otherwise, to whom the Respondents have disclosed all or any part of the Information;
(b) the date upon which such disclosure took place and the nature of the information disclosed including any communication sent by the Respondents containing the Information and any response received by the Respondents to such communication;
(c) the name and position of any natural person or persons who made or were responsible for or participated in any such disclosure and an explanation as to how he or she came into possession of the Information."
(1) The court is generally reluctant to make a mandatory injunction at an ex parte stage. The Court is holding the ring at this stage. The IAFC parties may have some reasons why they ought not to be subject to an order to disclose information of this kind.
(2) Without this matter coming in on notice, the IAFC parties will not have the opportunity easily to deal with that, and in my judgment is it not an answer to say that they can simply do that on a liberty to apply because of the difficulty of convening a hearing at this time of the year..
(3) Although the Court is satisfied that the necessary likelihood is established as above, in the context of a mandatory injunction the Court sometimes requires a particularly high degree of assurance that the injunction will stand scrutiny: it is better that that takes place on the return date.
(4) This application has not been brought on with such promptness that Saudia can say that it is a matter of the greatest urgency for it to be able to go to the recipients of the information. In my judgment, justice is done by that matter being held over until the return date.
For all these reasons, no mandatory injunction in that form is to be provided and, accordingly, paras.9 and 10 are to be removed.
Signed and approved
23 February 2021