REUTERS | Tobias Schwarz

How to “clearly formulate” amendments to statements of case: Various Airfinance Leasing Companies and others v Saudi Arabian Airlines Corporation


In the matter of Various Airfinance Leasing Companies and others v Saudi Arabian Airlines Corporation, the High Court presided over contested applications issued by the parties to amend their respective statements of case. The judgment contains a helpful breakdown of the factors  that the court should apply to these applications.

The parties

The claimants were effectively the lessors of lease agreements relating to 50 aircraft, following the assignment of the leases by a third party. The defendant was the lessee pursuant to the lease agreements.

The lease agreements

Pursuant to the lease agreements, the defendant was required to pay a basic rent, which was subject to two escalation factors:

  • The Airbus Escalation Formula Adjustment (Airbus Escalation), by which the basic rent would be escalated in accordance with a formula; and
  • The LIBOR Escalation of Basic Rent (LIBOR Escalation), by which the then current basic rent as escalated in accordance with the lease agreements would be further escalated on the first Basic Rent Payment Date and each third Basic Rent Payment Due thereafter.

The dispute

The parties differed on how the above two rent review mechanisms should alter the rent due under the lease agreements. The difference in the application of these clauses would have a significant impact on the sums due under the lease agreements. The claimants calculated that due to their interpretation of the rent review mechanisms, the defendant, as lessee, had underpaid by USD38.7 million. The defendant calculated that they had overpaid by USD21.9 million.

The claimants’ position

The claimants asserted that once the LIBOR Escalation was applied, this set a new floor to the basic rent (as already increased by the rent revision formulas), for future rent revisions.

The defendant’s position

The defendant asserted that the LIBOR Escalation would rise and fall with LIBOR. Quite obviously, both parties wished to argue the rent review mechanisms to their advantage.

Previous negotiations

Negotiations took place in 2016, which resulted in a Memorandum of Understanding, as to how the rent reviews should be implemented pursuant to the lease agreements. The defendant argued a narrower interpretation of the extent of what was agreed in the lead up to the Memorandum of Understanding.

The relevant rule: CPR 17.1(2)(b)

A party can reach an agreement to amend their statement of case with an opponent, however, where an agreement is not reached, then an application to court is necessary. The rule stipulates that once a party has served a statement of case, a party may amend their statement, with permission of the court. The Practice Direction to rule 17.1, provides that a party making an application, should file with their application their proposed amended statement of case.

Principles that apply to CPR 17.1(2)(b)

The judgment helpfully recites 10 principles (Principles) that a court should consider when presiding over an application to amend a statement of case:

  • The overriding objective should be considered, and the court will assess what injustice an applicant will suffer in comparison to the prejudice a respondent will suffer by permitting the amendment.
  • The proposed amendments should be properly and clearly formulated, so that they contain reasonable grounds for bringing or defending a claim. Proper particularisation should be utilised, so that an opponent can clearly understand the new points asserted in the amended statement of case.
  • The applicant should strike a balance between too much particularisation and not enough particularisation. Statements of case should be succinct, but capable of allowing an opponent to understand their position put forward. If the court considers the particularisation not to meet the minimum level of detail required, it should consider if further particulars are to be provided of if the respondent can request further information to improve the understanding of the amendment.
  • If the amendment contains a substantial new claim or defence, the applicant must demonstrate that this has a real prospect of success. The court must use the test in CPR 24.2 to answer this question.
  • The court should be mindful of whether the applicant is amending its statement of case, due to a change in its position, due to new information or documents becoming known. Long running litigation often brings about changes in the parties’ understanding of facts, so the court should be realistic about why the amendment is now sought, if there is new information that has recently come to light. Complex litigation can be given leeway for this reason.
  • The court should consider if the parties have addressed the amendments in other pleas or evidence and how much attention the parties have been giving these new issues.
  • Is the amendment timely or late? Could the amendment have been made earlier if the information was reasonably available at a much earlier date? How far along are the proceedings, and is a trial window fixed yet? As with any late application a court will take a dim view of trial window being placed in jeopardy.
  • If the application is not made in a timely manner, it will be treated as late, and the additional or wasted expenditure caused by the late amendment will be a consideration for the court.
  • An application may also be treated as late if the amendment will result in duplication of costs or the parties having to revisit previous steps of the litigation. However, if the application could not have reasonably been made earlier, then it should still be considered as timely, with the further exception to this being if the trial window is put at risk.
  • The application will be treated as “very late” if the amendment results in the adjournment of the trial window. In circumstances where the trial period is under threat from the amendment, the court places a heavy burden on the applicant to show strength of the new case, what justice will be achieved and impact on the opponent and other court users.

The applications in this case

The trial date was not at risk, so these applications were not considered to be “very late”.

The claimants wished to amend their statements of case to plead a variation, estoppel and estoppel by convention in relation to the rent review mechanisms.

The defendant’s amendment related to late payment amounts.

LIBOR Escalation amendments

The claimants sought to introduce an estoppel by convention argument based on an alleged common understanding as to how the LIBOR rent review mechanism would apply, which was discussed between the parties during the negotiation of the lease agreements. This was to be an expansion of the claimants already pleaded argument of estoppel by convention/conduct of the payment of previous invoices during the terms of the lease agreements.

The judge gave considerable thought to Principle 2 and whether the new aspect of the claim had a reasonable prospect. Consideration was additionally given to Principle 3 by assessing the level of particularisation advanced by the claimants to assist the defendant in being able to understand the new aspects of their cases.

Eventually, the judge awarded a modified version of the amendment to the statement of case, with consideration of Principle 5 being applied. The judge noted the complex nature of the litigation. The judge allowed the amendments on the condition that should the defendant make requests for further information on the new additions to the claimants’ claim, then these should be answered to the best of the claimants’ ability.

The judge was also mindful of Principle 1 and the lack of prejudice to the defendant in allowing the amendments.

Airbus Escalation amendments

The claimants wished to amend their Reply and Defence to Counterclaim to include how the Memorandum of Understanding should apply variations to the lease agreements. Additionally, they sought to argue that the defendant should be estopped by convention due to agreements reached in the previous negotiations.

The amendments were heavily disputed by the defendant, but the judge commented that the complexity of the litigation meant that an application hearing was no place to determine the wider arguments at this stage. Principle 5 was therefore applied, and the amendments were allowed. Principle 4 was also considered, in that given the further amendments were spawned out of aspects of the already substantively pleaded case, then the amendments should be allowed.

Once again, the judge struggled to find prejudice when considering Principle 1 and the overriding objective. A comment was made by the judge in relation to answering the defendant’s requests for further information. The judge expected the claimants to use the best of their ability to answer questions arising out of their amendments, should the defendant require assistance understanding the amendments.

Defendant’s late payment: amendments

Pursuant to the lease agreements, the claimants alleged that the defendant owed US$ 384,086.00. The leases provided for the lessor to pay these sums to charity (after deducting actual costs and expenses).

The amendments sought to place a burden on the claimants to evidence the expenses they had incurred in collecting the late payments and name the charities who were to receive the late payment sums, once the deductions were applied.

Applying Principle 2, the judge was of the opinion that the amendments were clear and easy for the claimants to understand the defendant’s position. The judge believed that the changes to the pleadings advanced arguable points. Comments on prejudice were again considered and disregarded, when Principle 1 was applied. The amendments were allowed.

Guidance for practitioners

As with all aspects of litigation, the overriding objective should be considered. Principle 1 was pervasive in the judge’s findings in all of the applications to amend. The judge balanced the potential for prejudice against the defendant when assessing all of the applications. It would therefore assist a court to identify prejudice when dealing with applications to amend statements of case.

It would appear that the judge was pragmatic in this particular case and established that the complex nature of the litigation meant that the particularisation of the statements of case were never likely to be ideal. However, this was caveated by an expectation that the parties should assist each other at a later stage of the litigation to answer requests for further information. If a litigator is unable to properly plead their client’s case within their pleadings, then steps should be taken to address any gaps as soon as possible, in anticipation of requests for further information arriving.

The principles listed in this case, also offer a stark warning to costs consequences in relation to “very late” applications and if a client is considering such an application, the client should be advised of these potential consequences.

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