The contracts of carriage were governed by the Warsaw Convention as incorporated into English law by the Carriage by Air Act 1961. Article 22 of the Convention limits the carrier's liability for cargo to a sum calculated by reference to the weight of the goods. Under Article 22(4):
"The limits prescribed in this article shall not prevent the court from awarding, in accordance with its own law, in addition, the whole or part of the court costs and of other expenses of the litigation incurred by the plaintiffs. The foregoing provisions shall not apply if the amount of the damages awarded, excluding court costs and other expenses of the litigation, does not exceed the sum which the carrier has offered in writing to the plaintiff within a period of six months from the date of the occurrence causing the damage, or before the commencement of the action, if that is later".

In May 2000, the cargo insurers wrote to Korean Air setting out their subrogated claim for the value of the six packages and the helicopter gearbox, which they put at GBP£66,000 and GBP£900,000 respectively. In July 2000, Korean Air made an offer to settle based on a limit set out in the contract of carriage of US$20 per kilo, which worked out at US$12,720 and US$19,180. In November 2001, however, Korean Air put forward another offer, this time based on the Warsaw limits, of GBP£8854.88 and GBP£13,502.72, a total of GBP£22,357.60. This was not accepted and, in December 2001, proceedings were issued in the name of Westland Helicopters based on the value of the items, now put at GBP£66,000 and just over GBP£330,000.

In July 2002, Korean Air made payments into court under Part 36 of the Civil Procedure Rules, offering GBP£9,155.49 for the printing equipment and GBP£13,805.22 for the helicopter gearbox – a total of GBP£22,960.71. The payments were accepted on 14 August.

Normally, when a payment into court is accepted, the recipient is entitled to claim costs up to acceptance of the payment in. But Korean Air argued that Westland was not entitled to these costs because Article 22(4) of the Warsaw Convention applied, and this overrode any procedural provisions that were inconsistent with it.

Judgment
The judge held that, but for a slight error in calculation, Korean Air would have succeeded. The exception in Article 22(4) of the Convention only applied if the amount of the damages awarded did not exceed the sum that the carrier had offered in writing within six months of the accident or six months before the beginning of the action. It did not, therefore, apply to Korean Air's first offer of July 2000. Their next offer, dated 14 November 2001, was made within six months of the date of commencement of proceedings. Unfortunately for Korean Air, the amount was less than was later paid into court. Even though this was probably only due to a straightforward error, it meant that the exception could not apply.

Could a payment into court accepted by the claimant constitute "damages" for the purposes of Article 22(4)? The judge thought it could. The fact that Korean Air had paid an amount calculated in accordance with the Warsaw limit did not mean that damages had not been paid. Under the Civil Procedure Rules, acceptance of a payment in terminates the litigation, just as a judgment would do.

The purpose of the Convention was that a carrier's liability should be limited to a specific amount and the purpose of the costs provision was to encourage claimants to accept their due entitlement or be penalised. Had Korean Air got its sums right in November 2001, Article 22(4) would have applied. As it was, it did not and Westland could recover its costs.