England and Wales High Court (Queen's Bench Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		28/05/2010

Mr Justice Cranston :

INTRODUCTION

1. This litigation arises from an acrimonious dispute in an employment context. The facts are rather unusual, in that the first defendant's employers were controlled by a wealthy Saudi Arabian, who has business interests both in that country and here. The employee was the general manager of one, and later managing director of another, of these companies, which are ultimately controlled from Saudi Arabia. Most of the matters in the litigation have at their heart the construction of a written agreement about the operation and management of aircraft from December 2003. Among the questions to be resolved are the entitlement to commission under the agreement and whether it extends to an aborted, and then a later actual, sale of an aircraft. The claim itself is for what is said to be a secret commission payable in relation to the maintenance of aircraft.

BACKGROUND

The parties

2. Sheikh Fahad has a number of business interests in Saudi Arabia. He is the Chairman of FAL Holdings Arabia Company Limited ("Fal"), which is the parent company of a number of companies in which he has a controlling interest ("the Fal Group"). Adel Al-Nouti is vice president of Fal and responsible for financial management in the Fal Group. One of the Fal companies is General Arabian Medical and Allied Service Limited ("Gama"), a company responsible for hospital management. Another company is Saudi Arabian Aircraft Management Company ("SAMCO"), an aircraft operation and management company. Sheikh Fahad owns SAMCO jointly with Sheikh Khaled El Seif.
3. Sheikh Fahad also is the sole shareholder in a company, Kama Aviation Company Ltd ("Kama"), which is the claimant in these proceedings. Sheikh Fahad is the Part 20 defendant. Kama was incorporated in the Cayman Islands on 5 September 1995. At the relevant time its two assets were a Boeing 727 ("the Boeing") and an Embraer Legacy ("the Legacy"). The Legacy was acquired in early 2003. The Boeing was sold to TAG Aviation ("TAG") in 2008 for US$725,000. The Legacy remains an asset, valued at about US$20m. Kama has no other purpose than ownership of the aircraft and has not had a bank account.
4. The first defendant, Mr Deir, is a Jordanian by origin but now has United Kingdom citizenship. He trained as an aeronautical engineer in Kidlington, Oxfordshire. He went to work in Saudi Arabia, initially for a Jordanian company. During that time he came into contact with Sheikh Fahad. Initially Mr Deir was an employee of Gama, but he was subsequently appointed general manager of SAMCO, from the inception of that company. From early 2004 until 2008 he was the managing director of London Ashford Airport Ltd. That is another company controlled by Sheikh Fahad. It operates Lydd Airport in Kent. He finished in that position in September 2008. The second defendant, Jet Connections Ltd, is a company Mr Deir incorporated in March 2004.
5. Among other SAMCO employees relevant to this litigation are Ahmed Abubaker, operations manager 2004-2006, Mohamed Maqsood Ali, operations manager 2006 to date, Pedro Cortus Saqvian, senior accountant, Saleem Ammari, aircraft maintenance manager for the Legacy 2002-2006, and Elizabeth Rosa, chief flight attendant 1999-2003.

Mr Deir and SAMCO

6. Sheikh Fahad, along with Sheikh Khaled, set up SAMCO, a Saudi Arabian company in 1996. In effect it was to manage their respective private aircraft. As well as managing these aircraft, SAMCO also managed a further aircraft, a Boeing 737, belonging to Sheikh Al-Hamrani. The aircraft were primarily for the private use of the Sheikhs but since they did not use the aircraft full time they were chartered commercially to third parties. That was the source of SAMCO's profits. The Boeing 727 was a larger, but an older, aircraft than the Legacy. Sheikh Fahad tended to use the Legacy more often than the Boeing 727, although he used the Boeing 727 on occasions.
7. Mr Deir entered into a contract of employment with SAMCO in 1996. He was appointed as general manager of the company with the place of assignment being Riyadh or as per company requirements. Hours per week were 48. Base salary per month was US$7500. Mr Deir was provided with housing, a car and a car allowance. In his role as general manager Mr Deir had a small staff. He was in charge of all aspects of the arrangements for all the aircraft, delegating as appropriate. As part of his responsibilities he arranged the commercial chartering of the aircraft in so far as they were not required for the Sheikhs' personal use. He acquired a range of contacts with various agents for this purpose.
8. There was a special provision in the contract of employment: "A total of [Ten] percent of SAMCO profits will be paid as bonus at the end of each year". The bonus was not paid as it should have been. There was a "partners' resolution", dated 10 December 2000, signed by Sheikh Fahad and Sheikh Khaled, under which Mr Deir was to be paid a bonus of SAR [Saudi Riyals] 815,392 to cover 10 percent of the company's profits for the four years 1996-1999. That amount was paid on 24 December 2000.
9. In the statements of income for the years ended 31 December 2000 and 31 December 2001, SAMCO did not make a profit. There was an overall loss. However, the statements show payments of SAR 1,463,453 and SAR 2,698,582 respectively to Mr Deir. That was because the bonus payments to which he was entitled were calculated by reference to each aircraft. Mr Deir's share of profit was by reference to those aircraft which made a profit in the respective years. The Boeing 727, owned by Sheikh Fahad through Kama, did not make a profit. The profit figure for the SAMCO aircraft which made a profit was calculated first by taking the net revenue (revenue from flights by the Sheikhs from their use, together with revenue from commercial charters, less broker's fees and owners' credit). From the net revenue figure there was then deducted fixed and variable costs, to produce an operating income. General and administration expenses were further deducted, but non-operating income added. Mr Deir then received 10 percent of the resultant figure, if it was positive.
10. From 2002 the system of drawing up the annual statements of income for SAMCO changed. Partly the motivation seems to have been that SAMCO could not continue to show losses each year and remain carrying on business. As a result of the change payments by the owners in relation to each aircraft were such that revenue was now adjusted to cover both fixed and variable costs. The upshot was that there was no profit and no loss attributable to any of the aircraft. In SAMCO's statements of income for the year ended 31 December 2002, and that ended 31 December 2003, revenue and cost cancelled out each other. Instead of receiving 10 percent of the profit on each of the aircraft, Mr Deir was now remunerated by payment of a 7 percent commission on the gross revenue attributable to commercial charter income, generated by each of the aircraft, minus brokers' fees. Mr Deir set out the new arrangements in a letter to Sheikh Khaled, dated 27 January 2002.

"Net amounts received from third party flights generated by SAMCO will be credited to the concerned aircraft owner's account less 7% which will be retained by SAMCO and paid quarterly to the undersigned as bonus …"

11. Neither Mr Deir's bonuses for the years prior to the financial year 2002, nor the commissions for the years 2002 and 2003, were paid promptly. When Mr Deir relocated to the United Kingdom from early 2004, there was a final benefits settlement for him. This included the 10 percent bonus sums set out in the 2000 and 2001 statements of income, together with the amounts attributable to the 7 percent commission on commercial charter flights for 2002 and 2003. The final benefits settlement was signed on the same day, 20 December 2003, as was the agreement which is at the centre of the litigation. Sheikh Fahad arranged for payment.

Agreement of 20 December 2003

12. The background to the 20 December 2003 agreement ("the 2003 Agreement") was that in 2001 Sheikh Fahad obtained a controlling interest in Lydd Airport in Kent. He acquired, through Lydd Holdings Ltd, a majority shareholding in the company which owns the airport, called London Ashford Airport Ltd ("LAA"). In the longer term Sheikh Fahad's aim was to develop the airport by purchasing additional land around it and building a new runway to accommodate larger aircraft. Mr Deir agreed to relocate to England to take up the position of managing director of London Ashford Airport Ltd.
13. Sheikh Fahad and Mr Deir met on 20 December 2003. Mr Al-Nouti, the vice president of Fal, was in attendance. An agreement was reached and reduced to writing. The relevant minutes were drawn up by Mr Al-Nouti and they were then signed by both Sheikh Fahad and Mr Deir. The minutes constitute the 2003 Agreement. There is an agreed translation of the 2003 Agreement. The Agreement provides as follows:

"1. Mr Zaher Deir shall operate and manage the private aircrafts belonging to HE Sheikh Fahad, namely Boeing and Legacy aircrafts, against a commission of 10 percent of the net profits.

2. The location of the Boeing aircrafts (sic) will be in London.

3. A special account will be opened for depositing the revenues generated from the operation process.

4. Mr Adel Al-Nouti will be notified of every flight operated by Mr Zaher Deir giving destination, flight price and number of flight hours.

5. A monthly accountancy will be made based on a list certified by both parties."

14. On 14 February 2004 Mr Al-Nouti faxed Mr Deir about the revenue from the Boeing 727. All revenue was to be deposited by commercial customers direct to a specified Fal Group account. Before any agreement was entered into for the commercial charter of the Boeing the attached form was to be completed and submitted for review and approval. Mr Deir confirmed receipt of the fax on 16 February 2004 and confirmed that he would comply. In fact payments by commercial charterers after this were made into Mr Deir's Jordanian account, before payment was made to Fal.
15. There are invoices of 10 May 2004 and 9 October 2004 where commission is noted as owing to Mr Deir on commercial charter flights involving the Boeing. By contrast an invoice for a charter flight involving the Legacy has a similar manuscript notation, but this time indicating that payment of commission was to an Omer Bahaj.
16. Mr Deir began as managing director of LAA and associated companies on 1 January 2004. On 20 January 2004 he proposed contract details to Sheikh Fahad, including a salary of £8500 per month, with a performance bonus of 7 percent of the companies' annual net profit, to be approved by the board. As well there were to be housing, transportation and medical care allowances. Sheikh Fahad objected and on 27 February Mr Deir wrote to him as follows:

"Firstly, I would like to assure you of my full and unconditional loyalty and support to you, and your projects.

I would like to apologise for my proposal as it was never intended to upset you in any way, and definitely it was never my intention to come across as if I wanted to take advantage of this situation. As a matter of fact I have assumed my full duties and responsibilities as a Managing Director and your representative based on a verbal agreement prior to any financial considerations.

At the same time I had no intention what so ever to work for any other companies either in the UK or anywhere else, otherwise I would have brought it to your attention at that stage.

I do appreciate and cherish your continuous support to me over the past years, and for that I have and will always endeavour to do my best in whatever I am assigned to do.

Therefore I am more than happy to accept whatever you may offer, as I strongly believe in your fairness and consideration.

Furthermore I do believe in this project and its future potentials. I am willing to accept this challenge and very confident that I could turn it to be very successful with your full support and directions."

17. Ultimately Mr Deir received a salary of £60,000 per annum and benefits including an accommodation allowance, company car and medical care. Mr Deir undertook additional duties at Sheikh Fahad's request relating to the Sheikh's interests in the UK. Sheikh Fahad regarded him as effectively the representative of Fal Holdings in the United Kingdom.

Operation Arrangements 21 December 2003

18. On 21 December 2003 Mr Deir sent a document from SAMCO to Sheikh Khalid, with a copy to Sheikh Fahad, entitled "Operation Arrangements for Fal and El Seif Aircraft". The covering letter, signed by Mr Deir, read:

"Subject: Operation Arrangements

In response to my recent meeting with H.E. Sheikh Fahad Al-Athel on 20 December 2003 and further to my phone conversation with Your Excellency on the same day, please find enclosed terms for the Operation Arrangements for Fal and El Seif Aircraft, for your perusal and approval."

19. The Operation Arrangements document itself set out details on matters such as payment by the owners to SAMCO and contracts with and payment to third party suppliers (clauses 1-5). Within SAMCO there was to be a Fal aviation department and an El Seif Aviation Department. Clause 7 provided:

"7. Both Aviation Departments will be run independent and parallel to each other, whereby all invoices will be received."

SAMCO's role was set out in clause 9:

"9. SAMCO's role will be to facilitate all necessary arrangements to both owners and their aircraft on daily basis, to liaise between owners and crew and any other necessary coordination."

Clause 15 provided for charters:

"15. SAMCO staff are directed to coordinate for third party flight based on the availability of the aircraft, specific client, request or other governing circumstances."

20. After moving to the United Kingdom in 2004, Mr Deir was no longer employed by SAMCO. Notwithstanding that Mr Deir was involved in aspects of managing Sheikh Fahad's aircraft other than chartering. Thus he arranged insurance and maintenance of the aircraft. He was involved in negotiating with Jet Aviation in Basel in 2006 so the Boeing could be moved to the United Kingdom after an aborted lease purchase of the aircraft by Inmaiyia. He also made payment from time to time of expenses incurred in respect of the aircraft.

Sale of Boeing 727

21. For some time Sheikh Fahad had wanted to sell the Boeing 727. In September 2002 an aircraft marketing agreement was entered between Wentworth and Affiliates Inc., a Delaware corporation, and Fal, under which Wentworth agreed to undertake and manage a worldwide marketing effort for the sale or lease of the aircraft. The agreement was signed on behalf of Fal by Mr Deir. The gross amount for the sale was to be US$8,700,000, and in the event of a sale Wentworth was to be paid a commission of US$250,000 in cash. Should Wentworth purchase the aircraft for its own account or to facilitate any transaction no commission was payable. No sale was in fact effected.
22. On 16 October 2005 an aircraft sale agreement was entered between Kama and Inmaiyia Establishment, a Saudi Arabian company ("Inmaiyia"). Prior to that, on 22 August 2005, Mr Deir had sent a fax to Mr Al-Nouti explaining the "two letters attached", one "based on our consideration", the other Inmanyia's suggested letter. In the fax Mr Deir referred to legal advice about the letters. He continued:

"Further to our discussions on Friday I have asked Abubaker for the operation contract of the 727 and for this to then be passed onto Captain Abu Al Wafa in order for them to utilise the aircraft whilst it is still under our name.

All operations and control will under SAMCO Aviation.

If you are in agreement I need your approval to sign letter number 2 on behalf of Kama Aviation and approve the Operation contract and the details of settling the invoices generated from the aircraft Operations with Abubaker."

Both letters were addressed to Inmaiyia on Kama letterhead, and in the United Kingdom.

23. The agreement with Inmaiyia was entitled a lease purchase agreement. The price of USD $3,400,000 was payable over 2 years and the title passed with a final payment of USD $1. Inmaiyia paid a deposit of USD $1 million but defaulted in its monthly payments. The aircraft was eventually repossessed when the aircraft was parked at Basle airport in Switzerland.
24. There is an email from Heather Lobb, signed as "PA to Managing Director" at Lydd Airport dated 14 November 2007 to the European Business Air News ("Eban") Magazine: "Further to our conversation last week please find attached advert for Boeing 727-100". The annotation suggests that the advertisement was to appear in the magazine and on its web-site and that the cost was £50.
25. Ultimately, the Boeing 727 was sold to TAG Aviation (Stanstead) Ltd ("TAG"), a United Kingdom company in early 2008. In an email on 26 February 2008 to Mr Deir, Mr Trevor Gunn of TAG wrote that he had completed the necessary preliminary inspection of the aircraft and technical records. On that basis TAG was prepared to offer US$725,000 for the aircraft on an "as is where is" basis. Mr Deir forwarded that email to Sheikh Fahad on 3 March 2008 as follows:

"Dear Sheikh Fahad,

Please find below an offer which I have received for the Boeing 727. This is the only offer on the market so far and it is difficult to find someone to buy the aircraft due to its age and the availability of other 727 in flying conditions.

This offer will be applicable to 10% commission (sic)

Kindly let me know."

26. There is a further email from Mr Deir to Mr Al-Nouti on 17 March 2008, when Mr Deir explains that Sheikh Fahad had advised him to contact Mr Al-Nouti, "as you are dealing with this sale". The email continued: "Please note that it is very important to get back to my buyer …" Mr Al-Nouti was pressed again later in the month and copied into emails between Mr Deir and Mr Gunn.
27. There are other emails, subsequently, to and from Mr Deir, about the proposed sale to TAG. On 11 June 2008 Mr Deir emailed Mr Gunn, copy to Heather Lobb, his personal assistant, attaching the amended aircraft purchase agreement and requesting transfer of the deposit to a Jet Connections account. He signed as managing director of Lydd Airport. On June 24, Mr Deir emailed Sheikh Fahad in the same capacity attaching the purchase agreement for signature, pointing out that, "as discussed" a 10 percent commission was payable, and requesting bank details for transfer of what would be payable after the commission was subtracted. An employee of the Fal Group, Mr Firo, emailed bank details. In another email of 25 June 2008 Mr Firo attached the purchase agreement duly signed, and gave details of how the original signed purchase agreement was being sent by FedEx.
28. The formal Aircraft Purchase Agreement of sale was dated 27 June 2008. It was signed by Sheikh Fahad and Mr Gunn. There is no mention of any agent and there is an "entire agreement" clause under which the agreement was not to be supplemented, modified or amended except by agreement executed on behalf of the parties. Sheikh Fahad executed a warranty confirmation of sale dated 1 July 2008.
29. On 3 July 2008 a document on Jet Connections notepaper was signed by Mr Deir and Mr Gunn. It was headed "Agreement" and was said to be between Jet Connections and TAG Aviation. Under it Jet Connections "will facilitate the sale/purchase" of the Boeing between Kama and TAG. The agreement was made "at no cost to the buyer".
30. By mid September 2008 Sheikh Fahad had not been sent a copy of the signed agreement nor paid for the Boeing aircraft, although under the contract payment was to be made by 1 July 2008. In fact TAG had paid the purchase price of USD $725,000 to Mr Deir. Demand was made of TAG on 17 September 2008. On 20 September 2008 Sheikh Fahad wrote to Mr Gunn inquiring how payment had been made to an unauthorised person. Meanwhile, on 17 September 2008 Mr Deir had emailed Mr Al-Nouti to inform him that he was in receipt of funds on the Boeing sale and would be holding them as a down payment on unpaid directors' fees.
31. There is a statement of account dated 30 July 2008 on Jet Connections' letterhead addressed to the directors of Kama in the Caymans, with a copy to Sheikh Fahad. It is signed by Mr Deir. It reads as follows:

"Please find below details of charges for services provided on both of your aircraft Boeing 727 VPCKA and Legacy VPCFA

Details

20 December 2003 ---1 June 2008.

Organising charter sales on Legacy VPCFA & Boeing 727 CPCKA.

Estimated sales USD 3,000,000. @ 10% = 300,000.00 (subject to verify aircraft Tech logs and passenger Manifest).

30 October 2005

Charge of 10% commission on the sale of Boeing 727 VPCKA to INMAIYIA ESTABLISHMENT Ref: Aircraft sale agreement dated 16 October 2005. Between Kama Aviation and INMAIYIA Sale Price USD 3,450,000 @ 10% = 345,000.00

Page | 1

30 July 2008

Charge of 10% commission on the sale of Boeing 727 VPCKA to TAG (Stanstead) Ltd. Aviation Ref: Aircraft Sale agreement dated 27 June 2008. Between Kama Aviation and TAG (Stanstead) Ltd Aviation Sale price USD 725,000.00 @ 10% = 72,500.00."

However, I find as a fact that this document was not sent. It is not mentioned in the Fal Group "resignation" board minutes of 19 August 2008, in an email Mr Deir sent to the Fal Group on 17 September 2008, and in earlier correspondence from Mr Deir's solicitors. For reasons which will become apparent I cannot accept Mr Deir's account that he had sent it.

Sale of Legacy

32. In parallel with the sale of the Boeing, in 2007 Sheikh Fahad contacted Wentworth & Affiliates to sell the Legacy. Under cover of a fax dated 12 April 2007 Mr Deir sent Sheikh Fahad a copy of the marketing agreement between Kama and Wentworth & Affiliates. The fax read, in part:

"Wentworth will market the Legacy for $19.85 million, and if they manage to sell the aircraft, for whatever price they will deduct their commission and your net shouldn't be any less than $18.5 million at any time.

The aircraft was purchased five years ago for $18.7 million.

Kindly sign the agreement and return to me as soon as possible."

33. Sheik Fahad made a minor amendment to the agreement and it was signed. It contained a clause under which Wentworth had exclusive rights worldwide to sell the aircraft. On 30 May 2007 there is an email from Mr Ammari to Mr Deir, a SAMCO employee, which reads: "Attached please find service bulletins that were incorporated on the Legacy …"
34. On 3 March 2008 Wentworth sent to Mr Deir an email with an attached offer for the Legacy for US$19.5 million. Mr Deir forwarded the email to Sheikh Fahad:

"Please find attached herewith an offer letter in regards to the purchase of the Legacy,

As you see the offer price is 19 Million and they require the aircraft to be enrolled on the engine maintenance …

all other terms and conditions are within the normal standard market terms.

Please let me know your intentions."

Two days later Sheikh Fahad replied that the Legacy was not for sale anymore.

35. Wentworth continued to press an offer it had received for the Legacy. In an email dated 9 April 2008 it recapitulated the marketing agreement which Kama had with Wentworth:

"Wentworth would advertise the aircraft at a list price of $19.85M; Kama Aviation would accept offers as low as $18.5M and; Wentworth would be paid a 4% commission on the sales price."

Ultimately the Legacy was not sold.

Lasham payments

36. From time to time SAMCO sent the aircraft it managed to ATC Ltd ("Lasham") for maintenance, and from 2006 the Boeing was parked at Lasham Airport, unused. Dated 28 January 2005 there is an "Invoice" addressed to the general manager at Lasham:

"to charge you for our services and support provided in regards [t]o the following aircraft Boeing VPCKA from 6 December 2004 until 22 December 2004. Total cost US$40,000,00 (Forty thousand US$)."

The payment was to be made to one of Mr Deir's accounts, at Standard Chartered Grindlays Bank Ltd, in Amman, Jordan. There are similar invoices in relation to another Boeing, that belonging to Sheikh Al-Hamraini.

ISSUE 1: NET PROFITS UNDER 2003 AGREEMENT

37. Logically the starting point in the analysis is Mr Deir's counterclaim for net profits under the 2003 Agreement. Clause 1 of that agreement provided that Mr Deir should "operate and manage" Sheikh Fahad's aircraft, the Boeing and the Legacy "against a commission of 10 percent of the net profits". During the course of the litigation a number of possibilities emerged as to how the net profits were to be calculated: (i) on commercial charter flights undertaken by the aircraft; (ii) on all flights undertaken by the aircraft, including Sheikh Fahad's private flights; or (iii) on commercial charter flights organised by Mr Deir. Ultimately Mr Deir submitted that (i) was the correct approach; Sheikh Fahad, that (iii) is how the agreement is to be interpreted.
38. Both sides accepted that the agreement was to be construed in accordance with the principles of English law. Both sides also accepted that the contract between the parties is contained in the written terms, not in any additional oral terms. Before the hearing Sheikh Fahad contended that only Kama was liable under the agreement, and that he was not personally liable. In closing submissions he accepted that both he and Kama were liable.
39. The principles applicable to interpreting the agreement are non-contentious. As Lord Hoffmann put it in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, 912H, the focus must be on the meaning which the terms would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract. The court is concerned with the objective intention of the parties and their subjective intentions are irrelevant. Evidence of the negotiations between the parties leading to the conclusion of the agreement is inadmissible: Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101, [39]. So, too, is the subsequent conduct of the parties: James Miller v Whitworth [1970] AC 583.
40. In the light of these principles, the meaning of the 2003 Agreement is relatively straightforward. By clause 1, Mr Deir was to operate and manage the aircraft, in conjunction with SAMCO staff, in addition to his position as managing director of Lydd Airport. That was what he had done as general manager of SAMCO and, in my view, the clause was designed to ensure that this was to continue. Mr Deir had his contacts with brokers in the industry to charter the aircraft. Clearly the details of Mr Deir's role were to change given his relocation to the United Kingdom and his training of SAMCO staff in the 9 months prior to his departure. But the Boeing was to be located to the United Kingdom. No one replaced Mr Deir as general manager at SAMCO, although Mr Abubaker, and later Maqsood Ali, were operations managers. In my view the meaning of the clause was that Mr Deir was to continue to have a general supervisory role in the operation and management of the aircraft. In my view the clause cannot be interpreted as limiting Mr Deir's role to operating and managing charter flights; by comparison with clause 4 the language is operate and manage "the aircraft".
41. As to clause 2, that made clear that the Boeing 727 was to be based in the United Kingdom. By implication the Legacy was to remain in Saudi Arabia, which was understandable as Sheikh Fahad used it more frequently than the Boeing. Clause 3 required revenues from the operation process to be paid into a special bank account. As we have seen a Fal Group account was designated by email to Mr Deir on 14 February 2004 for Boeing revenue. Clause 4 required Mr Al-Nouti to be given notification of commercial charter flights operated by Mr Deir. "Operate" in clause 4 is used in conjunction with flights, not aircraft, which lends support to the construction I have given to clause 1. Clause 5 required a monthly accounting to take place and for Mr Deir and Sheikh Fahad to certify monthly lists of flights. There is no reason to interpret this as meaning that it was Mr Deir's responsibility. SAMCO possessed all the relevant financial information and could produce the lists.
42. In my view clauses 2-5 were not conditions precedent to the obligation to pay Mr Deir the commission identified by clause 1. There is nothing in the agreement to suggest this. In any event, Mr Deir cannot be said to have breached these clauses: he made payments into the Fal Group account (clause 3); SAMCO received details of flights (clause 4); and it was at least as much SAMCO's responsibility as his to produce monthly lists and accounting (clause 5). Nor are clauses 2-5 otiose if Mr Deir is right in his construction. It was in the interests of both parties to establish sensible accounting procedures whereby all charter revenues should be paid into a single designated account and there was good sense in Mr Al Nouti being notified of charters arranged by Mr Deir and in having monthly accounting.
43. So Mr Deir was entitled to commission. The difficulty arises in interpreting the concept of "net profits" in clause 1 to which the commission was referable. As I have said, my view is that under this clause Mr Deir's role was to operate and manage the aircraft, not simply to arrange commercial charters, least of all commercial charters of the Boeing. That being the case it suggests that Mr Deir's commission under clause 1 cannot be confined to profit made on charters operated and managed by him or to charters initiated from the United Kingdom.
44. The factual matrix of the term "net profits" in clause 1 of the 2003 Agreement is what had happened in the preceding years. Neither party suggests that Mr Deir's commission is to be calculated in the same way that he was paid according to SAMCO's statement of accounts, but what happened in those years is the backdrop to the use of the term in the 2003 Agreement. In particular there were the annual statements of income produced in relation to each of the aircraft operated and managed by SAMCO. The statements showed the amount of revenue attributable to flights in respect of the year in question for each aircraft, the starting point for any net profits calculation. They also analysed the costs that were incurred throughout the year in respect of each aircraft, distinguishing between "fixed costs" and "variable costs". The fixed costs are the establishment costs associated with each individual flight. The variable costs associated with each of the flights for the relevant year can be calculated by taking the variable cost per hour and multiplying it by the number of hours in the year spent on flights.
45. For Sheikh Fahad it is said that when reading the contract as a whole, in particular clauses 1 and 4 conjunctively, the better construction of the agreement is that in consideration for organising commercial charters Mr Deir was entitled to 10 percent of the net profits generated. He was entitled to 10 percent against his operation and management of such charters. If Mr Deir was to be entitled to net profit on all commercial charters, not just the charters organised by him, then there would be no need for clause 4. Clause 4 fits squarely with a construction of the 2003 Agreement that Mr Deir is entitled to 10 percent on all commercial charters organised by him, the purpose of this clause being to identify those commercial charters organised by him upon which he is entitled to commission. Any other construction belies commercial reality because Mr Deir would be entitled to 10 percent net profit on all the profits made from the aircraft from that moment on, with Mr Deir needing not to do anything to achieve significant sums on chartering. Moreover, there is no factual basis for the concept of net profits to apply to all commercial charters. In order for Mr Deir to organise commercial charters he had to ensure that the aircraft was airworthy and properly maintained. Yet he had very little involvement with the Legacy after the 2003 Agreement, as the Legacy was based in Saudi Arabia. It was maintained by the full time engineer, and mainly used by Sheikh Fahad.
46. If net profits were not confined to commercial charters organised by Mr Deir, then they should be calculated on net profits from all flights. Prior to Mr Deir leaving SAMCO net profits were calculated on all charters, both Sheikh Fahad's personal flights, and commercial charters. There was no reason for this change without specific agreement. The meaning which the 2003 Agreement would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract would not be to restrict the agreement to commercial charters.
47. As far as calculating the cost element of net profits is concerned, Sheikh Fahad's case is that both variable and fixed costs must be taken into account. The best possible construction that Mr Deir can hope for is a finding that the agreement entitled him to 10 percent of the net profits from all flights, net profits being calculated as they were prior to the accounting change in 2002, with fixed and variable costs deducted. On Sheikh Fahad's case a key consideration is that the aircraft were commercially chartered primarily to reduce the fixed costs, so consistently with the definition of net profit from 1996-2001 fixed costs should be deducted if net profits are to include profits from the commercial chartering of the aircraft.
48. In my view the factual background against which the 2003 Agreement is to be interpreted begins with the aircraft. They were available for the personal use of Sheikh Fahad and there is no suggestion of making profits from these personal flights. This indicates that the private flights of Sheikh Fahad were not to form part of the net profits calculation. Moreover, the net profits figure in relation to individual aircraft in the pre 2002 income statements of income was dependent upon the level of contributions made by Sheikh Fahad for his private flights. There is no evidence as to how these contributions were calculated but it is plain that from the year ending 31 December 2002 that the contributions were specifically adjusted so that there would be no net profit. It cannot be that when the parties referred to net profits in the minutes of meeting they intended that the private flights figure should be included.
49. So it cannot be the net profits calculation was to follow the method used in the statements of income for the years 2000 and 2001. In those years Sheikh Fahad's aircraft had both incurred substantial net losses and it cannot have been the intention to rely on a method of calculation which gave rise to large losses as a matter of course. Both parties would have known that there would be no benefit to him in such an arrangement.
50. Once it is accepted that net profits are to be calculated by reference to charter flights, it is difficult to limit the scope of the calculation to charters arranged by Mr Deir. As a matter of construction I cannot have regard to Sheikh Fahad's evidence that the intention was that the net profits payments were a means of incentivising Mr Deir, so they were net profits on commercial charter flights he organised. Nor as a matter of law can the post-contractual documents, where Mr Deir was paid commission on commercial charters he personally organised, be used to interpret the agreement. For the same reason I must ignore the failure of Mr Deir to make any claim for net profits until this claim.
51. As to the terms of the 2003 Agreement, as I have held the obligations to operate and maintain the aircraft which Mr Deir had went further than the arrangement of charters. Clause 3 is a sensible accounting procedure whereby all charter revenues should be paid into a single designated account. Similarly, there was good sense in Mr Al Nouti being notified under clause 4 of charters arranged by Mr Deir. In my view both clauses 3 and 4 do not cast light, one way or the other, on the meaning of net profits. As to clause 5 there is just as much good sense in having monthly accounting in relation to the construction advanced by Mr Deir as there is in relation to the construction advanced on behalf of Sheikh Fahad.
52. What of Sheikh Fahad's submission that net profits is calculated by deducting from the charter revenue both the variable costs and the fixed costs? It seems to me that as a matter of construction fixed costs ought not to be deducted. That is because the agreement contemplates a monthly accounting of commission. This suggests that the costs attributable to each flight should be set against the revenue for that flight. By contrast, fixed costs are frequently annual costs and will only be calculated at year end. Fixed costs per hour, and therefore the amount to be allocated to each flight, can only be calculated once it is known how many hours the aircraft have flown in a particular year. In relation to shared fixed costs, it is necessary to know how much other aircraft have flown as well. Thus on the face of the agreement itself the inclusion of fixed costs is incompatible with the provision for monthly accounting. Support for this derives from the evidence of Mr Maqsood Ali, SAMCO's operations manager and, to an extent, the oral evidence of Mr Al Nouti although I also accept that it is possible to use monthly averages. The accounting practices of SAMCO form part of the factual matrix for construction purposes. Clause 5 of the Agreement therefore provides support for the contention that net profits should include variable costs but not fixed costs.
53. That this is the meaning to be attributed to "net profits" is supported by the reference in the oral evidence of Sheikh Fahad when he referred to "net net profits", being revenue less variable costs less fixed costs. Sheikh Fahad seemed to contemplate that net profits were revenue less variable costs, and that net net profits were revenue less total costs. The fixed costs were what Sheikh Fahad needed to expend in order for the aircraft to be available for his private use. It makes commercial sense for these costs not to be included in the net profits calculation. Thus in my view the calculation of net profits is on revenue from all commercial charter income and does not involve fixed costs, but is confined to variable costs.

ISSUE 2: COMMISSION ON THE SALE OF BOEING

54. Mr Deir's claim in relation to commission on the sale of the Boeing was advanced on two bases. First, it was said that the 2003 Agreement covered it because the phrase "operation and management of the aircraft" extended to arranging a sale of the aircraft. The expression, it was said, should be given a wide construction. Marketing for sale constituted part of the operation and management of the Boeing since this involved also taking steps in relation to its location and maintenance. If marketing was part of operation and management, so likewise should arranging a sale. At the very least, selling the aircraft was a corollary to the 2003 Agreement.
55. Secondly, it was submitted on behalf of Mr Deir that there was an independent agreement for commission on the sale of Boeing in July 2007. Mr Deir's evidence was that he discussed its prospective sale with Sheikh Fahad and expressly obtained his consent to payment of 10 percent commission in the event that he, Mr Deir, personally found a buyer for the aircraft. Mr Deir found a prospective buyer, TAG, in March 2008 and the offer from TAG was forwarded to Sheikh Fahad under cover of the email of 3 March 2008. That email made it clear that the offer obtained from TAG was subject to payment of 10 percent commission. Sheikh Fahad accepted that he had received the email. He did not respond to the email saying that commission was not payable.
56. In the further email of 24 June Mr Deir stated "As discussed, a 10 percent commission of USD$725,000 will be paid …" Again Sheikh Fahad accepted that he had received this email. The payment of 10 percent commission was not challenged in the email in response from the Fal Group. Mr Deir's evidence was that the email was sent following a discussion with Sheikh Fahad on 28 May 2008 in which the sale to TAG at a price of $725,000 was discussed, hence use of the words "as discussed" in the email. Mr Deir's evidence was that his entitlement to commission was referred to during this conversation of 28 May 2008.
57. On Mr Deir's case it was obvious throughout that he was not employing an agent and that any commission would therefore be for his benefit and not for that of a third party agent. That follows because if he, Mr Deir, had wanted to enter into any marketing agreement in respect of the Boeing, he would have had to seek the approval of Sheikh Fahad first. Since this was never done, Sheikh Fahad would have known that there was no marketing agreement. Moreover, the email of 3 March made it plain that the buyer was personal to Mr Deir since it says "Please find an offer which I have received for the Boeing 727". This aspect is even more apparent when compared with another email of the same day, forwarding an offer for the Legacy obtained by Wentworth & Affiliates. The chasing email of 17 March 2008, addressed to Mr Al-Nouti, refers to "my [i.e. Mr Deir's] buyer". Other emails in which Mr Deir pursues the TAG offer again reinforce the position that the buyer was personal to Mr Deir. The latter emails were sent to Sheikh Fahad, as well as to Mr Al-Nouti. There was simply no documentary evidence which could suggest that Mr Deir had engaged a third party agent and plenty of documentary evidence which showed that he had not.
58. In my view entitlement to commission on the sale of the aircraft does not flow from the 2003 Agreement. Sale of the Boeing had been contemplated at the time the agreement was entered, not least given the 2002 marketing agreement with Wentworth, but the term "operation and management" in the 2003 Agreement is not apt to cover sale. In any event, it is unclear how net profits would be calculated on sale as a basis for payment of commission. In his evidence before me, Mr Deir advanced for the first time the contention that the Boeing had a book value of US$1. Thus, in effect, the net profit was the sale price. There is nothing in the documents to corroborate that and I reject it. On Mr Deir's case the calculation of net profits for management and operation differs from that for sale. That undermines yet further the argument that sale falls within the terms of the agreement. On any sensible construction the 2003 Agreement does not cover sale or commission on sale.
59. Moreover, my view is that there was no separate agreement that Mr Deir would be paid any commission on sale of the Boeing. For reasons given under the next head there is a cloud hanging over Mr Deir's credibility in relation to his account of his dealings with Sheikh Fahad. Certainly on this issue I accept Sheikh Fahad's evidence as accurate, that he instructed Mr Deir to sell the Boeing, said he would pay commission, was told by Mr Deir that there was an agent which would charge 10 percent commission but, crucially, was never informed that it was Mr Deir himself who was the agent charging the commission.
60. In his evidence Mr Deir accepted that he acted gratuitously, in relation to Sheikh Fahad's business in the United Kingdom other than Lydd Airport. He accepted that he assisted in the attempt to sell the Legacy and that he had no expectation of a reward. He also said that when another agent was involved, he would not be entitled to reward. There would be nothing unusual, on Mr Deir's own account, of his acting without reward for the sale he effected of the Boeing.
61. There is no documentary evidence supporting Mr Deir's account of a separate agreement under which he was to be paid as an agent for the sale of the Boeing. The only documentary evidence concerns the marketing which Mr Deir undertook by placement of the advertisement in Eban magazine in late 2007, and that was through the use of his personal assistant as managing director of Lydd Airport. The emails in June 2007 were signed by Mr Deir as managing director of Lydd Airport, with no indication that the commission was payable to him or his company, Jet Connections. Nothing in these emails establishes that Sheikh Fahad knew that Mr Deir or his company was a commission agent. References, for example, in his emails to "my buyer" take Mr Deir's case nowhere. As one of his many duties working for Sheikh Fahad, Mr Deir had found a buyer for the Boeing. In my view there was no agreement that he – as opposed to an independent agent – would be paid commission for managing to sell it.
62. Mr Deir's case is that he is also entitled to commission on the aborted sale of the Boeing to Inmaiyia in 2005. His evidence was that he discussed the payment of commission with Sheikh Fahad, who said that commission would be paid once all the instalments had been received. Only payment of USD$1.2 million was received and the aircraft was repossessed.
63. There is no doubt that Mr Deir was concerned in the sale of the Boeing to Inmaiyia, although it seems to me both he and Mr Al-Nouti were jointly instrumental in achieving agreement with that company. However, there is no hint in any of the documents that Mr Deir was to receive commission as an agent who had effected that agreement. Sheikh Fahad could not remember any conversation that he had had with Mr Deir about this. Nonetheless, I simply do not accept Mr Deir's evidence that there was such an agreement.
64. In any event on Mr Deir's case there had to be a concluded sale to entitle Mr Deir to commission. The later sale to TAG could not be the sale to trigger commission because that would mean double commission. But neither could the aborted sale to Inmaiyia be the trigger because a sale was never effected, the aircraft being repossessed because of default in payment of the instalments. Mr Deir's claim for commission on the Inmaiya sale fails as well.

ISSUE 3: SECRET PROFITS

65. The payment of USD$40,000 by Lasham Airport is said by Sheikh Fahad to be a secret profit, a "kick back" paid to Mr Deir without approval, and for which he must account. Mr Deir says that the payment was a repayment of an overpayment for the purchase of alcohol on behalf of Sheikh Fahad. Sheikh Fahad sought to deny that he had ever required Mr Deir to undertake cash transactions, that he expected all transactions to be undertaken on the company credit card, but this was not the case. Elizabeth Rosa corroborated Mr Deir's evidence to the extent that she said that on a significant number of occasions Mr Deir gave her cash in substantial sums, for the purchase of alcohol for Sheikh Fahad.
66. I have no hesitation whatsoever in rejecting Mr Deir's evidence. The evidence points overwhelmingly to this payment by Lasham being a secret profit made to Mr Deir without the approval of Sheikh Fahad. Elizabeth Rosa's evidence supports Sheikh Fahad's case, not Mr Deir's, since she said that for purchases of items like alcohol receipts would be obtained. No documentation has been produced to support Mr Deir's case. In his oral evidence Mr Deir alluded for the first time to a note book, which he had now lost, which contained details of moneys owed to him by Sheikh Fahad for such purchases. That evidence had all the hallmarks of being manufactured during Mr Deir's cross-examination. The Lasham invoice is for services and support provided and is not typical of how Lasham documented credits on overpayments. Crucially, Mr Deir failed to explain the very similar invoices issued him by Lasham for Sheikh Al-Hamrani's aircraft.
67. As explained, Mr Deir's repayment must be made to Kama. Mr Deir's argument that Kama is not entitled to repayment because Lasham invoiced SAMCO, not Kama, is misconceived. Mr Deir accepts that he was acting as agent for Kama in respect of maintenance issues and that he owed fiduciary duties to Kama. Accordingly, if Mr Deir has made a secret profit in breach of his duties to his principal, which he has, and the principal is entitled to an account of the profit.

CONCLUSION

68. In respect of the retained 10 percent of the Boeing sale price held by Mr Deir (or Jet Connections) there must be a foreign currency judgment in the sum of USD$72,500 plus interest. In respect of the secret profit claim there must be a foreign currency judgment in Kama's favour in the sum of USD$40,000 plus interest. As to Mr Deir's counterclaims, Sheikh Fahad must pay the amount in the schedule proposed by the parties as to the net profits, in accordance with my findings earlier in the judgment. However, account must be taken of the payments to Mr Deir mentioned in paragraph 15. The schedule requires some adjustment because a full year's loss is claimed for 2008 whereas on Mr Deir's case, loss ceased in August 2008.