Mr Lewis argues that given Cranston J's findings that in about January 2005 Mr Deir was making a secret profit at the expense of Kama Aviation and transferring $40,000 to his Jordanian Bank (a) I should not shrink from finding that Mr Deir had malevolent motives at this time and (b) that he is "no stranger to manufacturing evidence".
In an earlier part of his judgment (at paragraph 59) Cranston J had said that for reasons given in relation to the "secret profit" allegation "there is a cloud hanging over Mr Deir's credibility in relation to his account of his dealings with Sheikh Fahad." In that part of the judgment he had rejected Mr Deir's claim that there was an agreement that he should receive a commission on the sale of the Boeing 727 aircraft referred to in the extract from Cranston J's judgment in paragraph 18 below. There was evidence that the Sheikh had agreed to pay a commission to an agent on the sale of the aircraft, but not on the basis that it was Mr Deir personally who facilitated the sale.
Cranston J also rejected Mr Deir's evidence that a statement of account dated 30 July 2008 on Jet Connections' letterhead, setting out what Mr Deir said was the agreed commission in relation to the Boeing 727 aircraft and addressed to the directors of Kama in the Caymans (with a copy to Sheikh Fahad), was sent.
Whilst, naturally, I respect the findings of Cranston J on the evidence and argument deployed before him, and recognise that as between the parties the unappealed findings in that litigation are binding upon them, I do not see that I should be unduly influenced by those findings. I have to say that in any litigation where feelings run high (as they seem to have done in this case) any tribunal will look with some circumspection at what any witness says on a crucial issue where the contemporaneous documentary material is unsupportive and/or where there is no other reliable evidence to support what the witness says. Inherent probabilities also have a role to play in that context.
It is, of course, a commonplace in all forms of litigation that a tribunal may accept what a witness says about some aspects of his or her evidence, but not others. I do not know the full history behind the decision to litigate part of the dispute between the parties in this case in one set of proceedings and litigate another part of the dispute in separate proceedings. The entire disputation might have been better dealt with by one tribunal in one trial when all credibility issues could be evaluated at the same time. However, it has not been dealt with in that way and, as it seems to me, I must simply evaluate the evidence in this case as best I can on the basis of the impression it has made on me. I do not think it is right for me to start with some preconceived notion about the reliability or credibility of a particular witness. I do not think that any principle of law is involved in this save to say that essential fairness does require that all parties to a trial start on a level playing field.
The background in more detail
I adopt with gratitude the following prιcis of the history of the relationship between Mr Deir and Sheikh Fahad set out in Cranston J's judgment in the previous litigation, a prιcis that also identifies some of the individuals who are relevant to the present proceedings:
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
. 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
.
Mr Deir and SAMCO
6. Sheikh Fahad, along with [Sheikh Khaled El Seif], 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
."
Cranston J also records (see [10]) that the bonus payment system referred to in [8] of his judgment was changed by agreement in 2002 to a system whereby Mr Deir would receive a payment of a 7% commission on "the gross revenue attributable to commercial charter income, generated by each of the aircraft, minus brokers' fees."
In circumstances to which I will turn in more detail shortly, at the request and with the full approval and encouragement of Sheikh Fahad, Mr Deir ceased his employment with SAMCO at the end of 2003 with a view to taking up other responsibilities on behalf of the Sheikh in the UK, principally, though not exclusively, to become Managing Director of London Ashford Airport Ltd.
There was a meeting held in Saudi Arabia on 20 December 2003 (attended by the Sheikh, Mr Deir and Mr Al Nouti) at which, amongst other things, a "Final Benefits Settlement" was concluded dealing with outstanding bonus payments for 2000 and 2001 and amounts attributable to the 7% commission on commercial charter flights for 2002 and 2003, together with other matters arising from the end of his contract with SAMCO. It was signed by Mr Deir and the Sheikh. Although other disputes have arisen from what occurred at that meeting (and indeed in relation to other discussions at or about this time), the Final Benefits Settlement is one matter that does not appear to have given rise to any dispute. By virtue of it Mr Deir was due a little over SAR 1.2 million which was indeed paid to him.
It was contemplated that Mr Deir would, notwithstanding his new posting in the UK, continue managing and operating the Sheikh's two planes, the Boeing 727 and the Legacy. An agreement concerning that was drawn up at that meeting. One of the major issues in the trial before Cranston J was the meaning of that agreement and that litigation has, of course, concluded that matter. As a result Mr Deir obtained judgment in his favour for just under US $266,000 but, as a result of certain adverse findings on other matters (see paragraphs 12 and 16 above), he and Jet Connections were held liable to Kama Aviation Company Ltd in the overall sum of just over US $134,000. The net balance following Cranston J's judgment was in Mr Deir's favour.
Having set that scene, I must turn to the more detailed background to the issues directly before me for resolution. They arise from the scenario referred to in paragraph 20 above.
Lydd Airport
Lydd Airport (now known, or sometimes referred to, as 'London Ashford Airport') is situated in Romney Marsh in Kent. For a number of years it has been seen by some as an airport that could usefully and appropriately be expanded and developed. Inevitably, on an issue such as that there will be those who support the development and those who are opposed to it. I have been told that the local planning authority last year resolved to grant planning permission for at least a degree of expansion and development, including the extension of the runway. However, that decision has been "called in" by the Secretary of State and a local hearing into the proposals is due to be held in February this year.
That is the present position from the planning point of view, but the backdrop to the current litigation goes back to about 2001. Sheikh Fahad was told by Mr David Gardener, a financial adviser to the Sheikh, of the opportunity that Lydd Airport presented. By then Mr Deir had worked for the Sheikh for several years and was undoubtedly a trusted employee who had an aviation background. The Sheikh sent him to have a look at the airport to see if he considered that it had development potential. At that time the airport was owned by London Ashford Airport Ltd ('LAA'), a company incorporated in January of that year and controlled by Mr Jonathan Gordon and Mr Robin Gordon. Mr Deir went to the airport during the summer of 2001, took the view that it had potential, but considered that it would need significant investment. His recollection was that he gave £25-30 million as the investment figure required to realise the full potential of the airport.
Sheikh Fahad instructed an English solicitor who practised in Newcastle-upon-Tyne, Mr Michael Winskell, to deal with the purchase and secure a majority shareholding in the company that owned the airport. This took place at some stage during 2002. I do not understand it to be in dispute that there were at the time of the acquisition of the majority interest in London Ashford Airport Ltd ('LAA') 6,230,770 fully paid up shares issued in that company. A BVI holding company, Lydd Holdings Ltd, owned by the Sheikh, acquired 3,923,078 shares or 63% in LAA. The balance of 2,307,692 shares was held by Lydd Airport Group Ltd the shares in which were held by Cranworth Ltd, another company controlled by the Jonathan and Robin Gordon. Lydd Airport Group Ltd subsequently changed its name to South East Airports Ltd. At all events, by this process during 2002 the Sheikh effectively obtained a majority interest in the company that owned and operated the airport.
Mr Winskell, who had worked for the Sheikh on a number of other UK and European projects over the years, became a director of LAA and, together with the Gordon Brothers, helped to manage the company at this time. Mr Deir's evidence is that he was asked to visit the airport again during 2002 which he did. The Sheikh said that his business relationship with Mr Winskell deteriorated during 2002. It emerged during his oral evidence that a significant factor was that, as a lawyer, Mr Winskell was charging the Sheikh on an hourly basis for his time. However, for whatever reason, the Sheikh became disenchanted with Mr Winskell and as a result the Sheikh confirmed in his witness statement that he had earmarked Mr Deir for the role of overseeing his interests at the airport and for "the wider position as the principal representative for the remainder of [his] business and personal interests in the UK." In relation to the role at the airport Mr Deir had become a director of LAA on 31 December 2002 although there seems to be some doubt as to whether he was told about that at that time.
There is an issue about when the possibility of Mr Deir coming to the UK to manage the airport was first raised with him by the Sheikh. Mr Deir says that it was "in or around the spring of 2003" and that he did not immediately agree to the idea. In unchallenged evidence he said that he had recommended to the Sheikh that he acquired the adjoining golf course and that he (Mr Deir) had a meeting with the owner of the Golf Club in September 2003 to finalise the deal. Given that on 22 December 2003 Lydd Holdings Ltd acquired all the shares in Lydd Golf Club and Driving Range Ltd and that Mr Deir became company secretary of that company and another company called Lydd Golf Ltd that day, it would seem likely that the plans for him to come to the UK were well advanced by then. The Sheikh's witness statement, and indeed his oral evidence (given over the short period he attended the trial), was to the effect that it was not until the meeting on 20 December 2003 that he first invited Mr Deir to consider the opportunity of going to the UK and undertaking the role at the airport together with the wider role he had in mind for him. Indeed his suggestion, in his oral evidence, was that Mr Deir had decided to leave SAMCO, was leaving Saudi Arabia and would be looking for a new career at which point he (the Sheikh) said "why don't you take care of Lydd Airport?"
Whilst I am alive to the possibility of the Sheikh simply deciding something on the spot and expecting anyone employed by him to act upon his instruction immediately and without question, I do find this account impossible to accept. Even if, as may have been the case, there was, over a number of months, an emerging acceptance on both sides that this would be the role of Mr Deir in the future, I am unable to accept that it was simply "sprung" on him in the way that the Sheikh suggests. Mr Deir says that he had to ensure that there were people trained to take over SAMCO for which he had, of course, been responsible for approximately seven years. (Indeed Mr Ahmed Abubaker effectively took over this role from the start of 2004.) This seems inherently more likely than him simply being required to depart that post on or about 26 December 2003 with someone else simply taking over immediately afterwards. Equally, Mr Deir would have had personal and family arrangements to consider and make. Whilst I have no doubt that the Sheikh was quite capable of behaving in a somewhat dictatorial fashion by many standards (and I do not think that he would disagree with that assessment), I am sure that he would have wanted to keep Mr Deir "on side" given the important role he was going to play at Lydd Airport and perhaps more widely in the UK. The Sheikh had a number of important business interests in the UK and Lydd Airport was undoubtedly an investment that he hoped and anticipated would yield substantial dividends in due course. I am inclined to think that the Sheikh's evidence was designed to suggest that the period during which it could be said that there was any negotiation about the terms upon which Mr Deir would come to the UK took place was very narrow. The extent to which there was any meaningful negotiation is a matter to which I will have to turn shortly, but I prefer Mr Deir's evidence about the general circumstances in which he came to be asked to come to the UK. As I have indicated, the inherent probabilities seem to me to support this conclusion, those probabilities also taking account of the likelihood of the Sheikh wanting his chosen person to take on his affairs in the UK to be ready, willing and able to do so.
That conclusion is also supported to some extent by what I perceive to have been contradictory aspects of the Sheikh's case. For some while Mr Lewis cross-examined Mr Deir on the basis that it was earlier during 2003 that the move to the UK was mooted. As I have indicated, that is precisely Mr Deir's case. Mr Hani Mutlaq was hired during 2003 with a view to taking a role at the airport which indeed he did in May of that year. It seems to me quite illogical for everything to be set up for operations to commence there in early 2004 without Mr Deir having indicated at the very least a preparedness to go and undertake the role the Sheikh wanted him to perform.
It is common ground that at the meeting on 20 December to which I referred in paragraph 21 above the (uncontroversial) Final Benefits Settlement was concluded. This was plainly designed to finalise outstanding amounts due to Mr Deir from his employment in Saudi Arabia. Equally, the (controversial) agreement concerning the future management of the Sheikh's aircraft was also concluded this day. The fact that each of these agreements was concluded would not, of course, necessarily mean that an agreement in relation to Mr Deir's remuneration package in his new role or roles within the UK would also have been agreed. However, it would have been very surprising indeed if the issue was not raised at or about the same time.
The Sheikh recalls only one meeting with Mr Deir (at which Mr Al Nouti was also present). He said this about it in his witness statement:
"I
accept that Mr Deir was in Riyadh on or around 21st December 2003, because I met with him and Adel al Nouti
the previous day. I discussed with him a new opportunity for him to become the managing director of London Ashford Airport Ltd
and Lydd Golf Club as well as the wider position as the principal representative for the remainder of my business and personal interests in the UK. I wanted Mr Deir to replace Michael [Winskell]. The terms of his employment were discussed in outline. There was no discussion about salary or directorship fees. I also discussed with him the future direction of the airport. He was excited about the role, which was effectively a promotion for him within the FAL Group. The meeting confirmed my view that he was the right man for the role. The majority of his work was to be based around the Airport and he had a good background in this environment." (My emphasis)
I have already expressed my preference for the view that this was not the first occasion upon which Mr Deir's new role at the airport was discussed. However, the Sheikh is there accepting that there was some discussion about the terms of Mr Deir's new employment. What the Sheikh is addressing in that section of his witness statement is the case advanced by Mr Deir that there was a further meeting on or about 21 December 2003 when aspects of his remuneration were discussed.
Mr Deir's pleaded case in this respect was as follows:
At a meeting on 21st December 2003 at the first Defendant's office in Riyadh, Saudi Arabia, the Claimant entered into an oral agreement with the first Defendant in the following terms:
(a) The first Defendant would act as a company director for a variety of companies as agreed between the Claimant and the first Defendant from time to time;
(b) In consideration for the same, the parties agreed that the pertinent companies and/or the first Defendant would pay to the Claimant the sum of £20,000 per year for each company for which he acted as Director.
What Mr Deir said in his witness statement about meetings at this time was as follows:
18. It was arranged that I should start in the United Kingdom on 1 January 2004. Just before Christmas 2003, I had a number of meetings with the Sheikh to finalise the basis upon which I was going to work for him in the United Kingdom. I finally came to the UK on 26 December 2003.
19. The first of these meetings took place on 20 December 2003. The purpose of that meeting was to discuss my ongoing involvement with the operation and management of the two aircraft owned by the Sheikh, a Boeing 727 and a Legacy Embraer. The then finance officer of FAL Holdings, Mr Al Nouti, was in attendance and prepared minutes of that meeting which were later faxed to me on 24 December 2003 already signed by the Sheikh and which I then counter-signed and faxed back to the Sheikh on the same day. On the day following the meeting of 20 December 2003, I wrote to the Sheikh's partner in Samco, Sheikh El Seif, setting out proposed arrangements for the future operation of Samco. I copied the letter in to the Sheikh, referring to the meeting on the previous day. I retained the documents here referred to within my personal file of papers and brought these to the United Kingdom.
20. I had a further meeting with the Sheikh on or about 21 December 2003 in his office. On this occasion, only the Sheikh and I were present. The purpose of this meeting was to discuss my future role in the UK working for the Sheikh. We discussed the Sheikh's interests in the UK generally
.
It was at this meeting on or about 21 December that, according to Mr Deir, the Sheikh made the commitment pleaded in the Claim Form to which I referred in paragraph 33 above. At a later stage in his witness statement he said this:
"The Sheikh proposed and I accepted that I was to receive £20,000 a year as fee for each and every directorship to which I was appointed on behalf of the Sheikh in the United Kingdom. It was a personal agreement that I had with the Sheikh. My relationship with the Sheikh was such that I did not consider it necessary for this to be documented in writing formally and Mr Al Nouti was not there to take the minutes. I trusted the Sheikh to honour this agreement. Such arrangements were frequently entered into orally with the Sheikh and that was how he conducted much of his business. Unfortunately the Sheikh has now seen fit to deny this agreement that we entered into. This agreement was an important reason why I agreed to take up the position with LAA starting on 1 January 2004."
As I will indicate later (see paragraph 101 et seq), Mr Deir claims to have made a handwritten note shortly after that meeting in which one of the items recorded is the Sheikh's commitment in relation to Director's fees. Since, however, that handwritten note has emerged relatively recently in the context of this litigation, I propose to return to it when I have traced the rest of the history of this part of the case before me.
Mr Deir says that there was no time available to the Sheikh to discuss the full remuneration package that would go with his new role at Lydd Airport and, accordingly, nothing further was discussed before his departure for the UK on 26 December. As a result of this, when he commenced employment at the airport in a formal sense on 1 January 2004, no contract of employment had been finalised.
Mr Deir said in his evidence that one of the reasons for waiting until 26 December before departing for the UK was because he was waiting for the payment of the sums due to him under the Final Benefits Settlement. He wanted the sums paid rather than waiting until after he left Saudi Arabia. His account, which does seem to be borne out by other evidence in the case, is that it is common in Saudi Arabia for payments to be delayed well beyond what would normally be thought to be reasonable in the UK. This, according to Mr Deir, applied to the Sheikh but, as he said, "no one wanted to annoy him by pressing for payment too hard." This, of course, gives a clue as to the dynamics of the relationship between Mr Deir and the Sheikh. Doubtless at that time (at the end of 2003), Mr Deir knew how to gauge what to say or not to say to the Sheikh with regard to payments of money and/or to employment contract issues. Equally, there can, in my judgment, be no doubt that he was a trusted employee at that time and the Sheikh, no matter how one-sided any such conversation or discussion might be, would want that relationship of trust to continue. Ensuring that Mr Deir was content financially would have been a central part of that. An important issue for consideration in that context is the extent to which it can properly be said that the Sheikh did make a contractually binding commitment to payment of director's fees. I will return to my conclusion about that when I have reviewed the evidence in full.
It is, however, right to say that there is no contemporaneous record, acknowledged by or on behalf the Sheikh, that the commitment to the payment of director's fees was made. The Sheikh's essential case is that had he made such a commitment, it would have been recorded in writing. Mr Deir's case is as set out in the extract from his witness statement recorded in paragraph 35 above. It is clear that the Sheikh's whole approach to business, which is entirely understandable, is if he makes a commitment he will abide by it. Whilst he would normally expect commitments to be made in written form, he did confirm clearly in his evidence that, from his point of view, an oral commitment is just as binding upon him as one reduced to writing. Mr Al Nouti confirmed that also.
It is, of course, the alleged commitment to the payment of director's fees that lies at the heart of the claim advanced by Mr Deir in these proceedings. However, since issues arise about his contractual entitlement as managing director of LAA to various expenses claimed and other matters, I should review the evidence that relates to that contractual situation also.
As I have indicated, Mr Deir came to the UK without a concluded contract of employment in relation to his role at Lydd Airport. As a result he wrote to the Sheikh by means of a fax communication dated 20 January 2004 setting out his "proposed contract details for your review and approval." These included an annual, but renewable, contract of employment with a monthly salary of £8500, travel allowances "as per company policy", a performance bonus based on 7% of the company's net annual profit, a housing allowance of three times the monthly salary, a transportation allowance of twice the monthly salary (or the provision of a company car) and family coverage medical care. It suggested that the position was "Managing Director, for London Ashford Airport, Lydd Air, and Lydd Golf Club".
That letter related, of course, to the contract of employment relating to Lydd Airport. It did not purport to deal with any director's fees concerning other companies. Mr Deir explains the lack of reference to the alleged agreement concerning directors fees in this way in his witness statement:
"This letter makes no reference to my entitlement to directors' fees because that was not part of my employment contract with LAA but was a personal matter between myself and the Sheikh."
It is clear that the letter did not go down well with the Sheikh. Mr Al Nouti telephoned Mr Deir about two days later indicating that the Sheikh was upset by the fax and the suggestion of the kind of package put forward by Mr Deir. Mr Deir prepared a note of that telephone conversation afterwards. I do not think that there is much dispute between him and Mr Al Nouti about the gist of the conversation subject to one matter. Mr Deir explained that he would have to pay UK tax at 40% now that he was resident here. According to Mr Deir, Mr Al Nouti said that he could be paid "from Riyadh" so that he would not have to pay tax. Mr Al Nouti denied making that suggestion because it would have involved circumventing the UK tax authorities. Nothing really turns on this because Mr Deir never was paid from Riyadh. However, given that Mr Mutlaq, who worked at Lydd from the outset, was paid from Riyadh for about two years, there is the hint that this procedure would have been adopted had it been thought expedient. Overall, I see no reason to doubt Mr Deir's note of the telephone conversation.
Mr Deir asked Mr Al Nouti to make a counter-proposal. He expressed some concern that the suggestion was to discuss the matter again in about two month's time. At all events, they did agree to defer consideration of the issue for the time being.
It is not entirely clear whether there was a direct telephone conversation between Mr Deir and the Sheikh thereafter, but on 27 February Mr Deir wrote the Sheikh in the following terms:
"Further to our phone conversation in regards to my employment proposal, I would like to explain and clarify my position.
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."
Within a day or so of that communication, the Sheikh set out a "proposed offer" in respect of Mr Deir's role as "Managing Director for London Ashford Airport, Lydd Air and Lydd Golf Club" which included £5000 per month, a one-year renewable contract (subject to 3 months notice on either side), a housing allowance of three times the monthly salary and a transport allowance of two times the monthly salary. Family medical care was to be provided, but there was no suggestion of a performance bonus or a family travel allowance. The letter ended with an invitation to Mr Deir to confirm that the terms were acceptable in order "to process the pertinent documents".
Mr Deir was unhappy with this proposal. From his perspective, it represented considerably less than he was earning in Saudi Arabia and, of course, he was subject to UK tax whereas there were no taxes in Saudi Arabia. According to his witness statement, he telephoned the Sheikh shortly after this to this effect:
"The next day I telephoned the Sheikh to explain that being in the UK, I would have to pay income tax on all my income, and the salary on the offer letter would not be enough to cover my cost of living and would be less than I was receiving when I worked for Samco. The Sheikh reminded me about our agreement in relation to my entitlement to director's fees in due course but he also promised to look into the difference between his offer and my request for salary. I accepted his assurances and I did not raise either of these issues with him anymore."
He reiterated in cross-examination that he spoke to the Sheikh after receipt of this letter and the Sheikh said words to the effect of "remember, you've still got directorship fees." It was put to him specifically that there was no telephone conversation after the communication of 1 March (the suggestion being that it was "fictitious"), but he adhered to his account. When the Sheikh was questioned about this, he said that he "did not remember" any telephone conversation to this effect. He denied mentioning the director's fees and said that he had never promised £20,000 per company and that Mr Deir had never mentioned it.
A number of things are common ground about the position thereafter. First, no formal contract of employment was ever drawn up. Second, in terms of salary, allowances and leave, Mr Deir was paid and treated in accordance with the letter of 1 March right up until the time he resigned in 2008. Mr Deir's attitude was that he did not agree to it, but accepted it.
There was, therefore, no further negotiation as such about the remuneration package of Mr Deir in his role as managing director of LAA. If what he says is correct, then he would have anticipated receiving director's fees when appointed to various companies. He would also have anticipated receiving a significant bonus if he managed to obtain planning permission for the development of the airport. This was an expectation that the Sheikh had held out at the outset and Mr Deir, as I understood him, accepted it. This was doubtless a policy on the part of the Sheikh of rewarding success when it was achieved. Mr Deir doubtless realised that nothing else was going to be achieved by trying to discuss the salary package any further and that is why he said nothing further about it. A question that may need answering in due course is whether, but for (as Mr Deir would put it) the renewed pledge for the director's fees, he would have accepted the package. His case, of course, is that this had been a commitment on the part of the Sheikh from December 2003 and it had effectively been reiterated shortly after 1 March 2004. He (Mr Deir) says that the agreement was "an important reason why I agreed to take up the position with LAA starting on 1 January 2004."
Because the essential focus of this review of the background is upon the alleged commitment to pay director's fees in due course, I intend to move forward to the next significant event in that context. I will have to return to the chronology to deal with other aspects of the arrangements obtaining within LAA over the next four years or so in due course. Those arrangements concern the "perks" and/or other benefits that Mr Deir says were properly available to him as he carried out his work for LAA. It would seem that his focus from then on was on his work at Lydd and such other responsibilities as were entrusted to him by the Sheikh. The principal objective at the airport was to secure the planning permission for the extended runway. In answer to a question from me the Sheikh said that he anticipated obtaining planning permission within a year "maximum". That, of course, has not occurred and the uncertainty continues some six or seven years or so from the conversations with which this case is concerned. Nonetheless, there is no dispute about Mr Deir's commitment to that particular objective.
I would merely note at this stage that in March 2004 Mr Deir's company, Jet Connections Ltd, was set up, Mr Deir and his wife being the only shareholders owning 50% each. I will return to that in due course (see paragraph 132 et seq).
The next event of any significance in the dispute about director's fees was a meeting (or two meetings) on 9 December 2004 at the Sheikh's London residence in Basil Street. I will deal with the evidence concerning this meeting (or these meetings) below. There is one background issue that needs to be recorded.
As I have recorded above (see paragraph 27), at least by sometime during 2003 the Sheikh had decided that he wanted to replace Mr Winskell. However, part of the history from which the Sheikh wished to escape in that context was an agreement between them concerning a share in the profits by Mr Winskell in any venture undertaken by the Sheikh in which Mr Winskell was to take part in a profit-sharing way, including the Lydd Airport venture. The agreement was in a memorandum dated 8 February 2001 signed by the Sheikh and Mr Winskell in the following terms:
"This memorandum is to record the agreement reached between Fahad Al-Athel ("FAL") and Michael Winskell ("MW") relating to new projects in which FAL chooses to involve MW on a profit-sharing basis.
Where FAL selects such projects it is agreed between FAL and MW that in consideration of MW agreeing to make a reduction of 25% in all charges levied by him in respect of such project on the fee basis that existing between FAL and MW at the date hereof (£150 per hour) FAL agrees to pay to MW 5% of the net profits derived from such project calculated after the return to FAL of all monies invested by him into such project.
The first project to which this agreement is to apply is FAL's proposed participation in the development of Lydd Airport in Kent."
Although it is to be noted that whether Mr Winskell was to take part in any venture on a profit-sharing basis was to be determined by the Sheikh (and not by mutual agreement), it had been agreed in 2001 that the Lydd Airport venture was to be one such occasion.
What can be said with confidence about the meeting or meetings on 9 December 2004 is that Mr Winskell agreed to relinquish any right that he had under this agreement because it is clear that there is a handwritten endorsement to that memorandum signed by Mr Winskell at the foot of the copy that appears in the trial bundle which reads as follows:
"In consideration of the payment to me of one pound (the receipt of which I acknowledge) I surrender any rights or claims to which I have under this Agreement."
For whatever reason, Mr Winskell agreed to forego any possible profit from the Lydd Airport venture. Given what must have been the early assessments of the possible returns on this venture, relinquishing such an interest (even a 5% interest) must have been a significant decision and, to the extent that any persuasion by or on behalf of the Sheikh was necessary to achieve this, it must itself have been a somewhat sensitive exercise.
At all events, those present at the meeting(s) were the Sheikh, Mr Deir, Mr Gardener, Mr Winskell, Mr John Lowings and Heather Lobb-Tosh (Ms Heather Lobb). Mr Lowings was then a partner (now a consultant) with the firm of solicitors, Hallett & Co, based in Ashford in Kent that acts for the Sheikh in this litigation.
Ms Lobb was then a recently-joined member of the executive office of LAA (having since March 2004 been a customer service officer at the airport) who was employed to assist Mr Deir's personal assistant at that time, Samantha Rice. Ms Lobb attended the meeting(s) as a minute-taker. (In March 2005, when Ms Rice left, she was promoted to be Mr Deir's personal assistant on a full-time basis. She has remained his personal assistant since that time, even after his departure from LAA in September 2008.)
Ms Lobb's notes concerning the meeting(s) were quite extensive and, if accurate, suggest that there was a fairly wide-ranging discussion about the Sheikh's interests in the UK. It appears that this was something of a "winding up" meeting so far as Mr Winskell's involvement with the Sheikh's interests were concerned. Mr Lowings' note of the meeting was very short, but it does include the expression "[discussing] other matters with which we were not directly concerned", a note which does support the general proposition that the discussions were more wide-ranging than his own note indicated.
Ms Lobb's evidence, which I have no reason to doubt on this issue, is that she remembered the meetings clearly as it was the first external meeting she had attended in her new capacity and the first time she had met Sheikh Fahad. She described it as "a big experience for me".
She had, doubtless at Mr Deir's dictation, prepared a typed agenda for the meeting. One of the principal items on the agenda was a company known as 'FAL Aviation UK Limited'. Mr Deir, who had by then been working at Lydd Airport for nearly 12 months, had moved operations there forward as might have been anticipated. Apparently, he and the Sheikh had met in Nice at some stage and had discussed the need for a corporate vehicle to act as the handling agent at the airport in other words, a company that would provide handling services to aircraft landing at Lydd Airport. Handling services include, as I understand it, all aspects of the attention that an aircraft will require between its arrival at an airport and its departure. Mr Deir had written to the Sheikh on 25 November 2004 detailing a number of actions he had taken and referred at the outset to the need for a handling agent and the enclosure with the letter of a "complete study for the
company" that was to be the corporate vehicle. It appears that the Sheikh had suggested that it should be called FAL Aviation UK Limited. Mr Deir's suggestion was that the new company would be registered in the UK and would be a subsidiary of Lydd Holdings Limited. The letter of 25 November contained the following two paragraphs:
"If the above meets with your approval; could you please advise me a minimum of two people to have appointed as company directors?
It is important to have this company established by the end of January 2005 in order to be able to support the airport commercial operation which is scheduled to start by end of March 2005."
To put this briefly into context, the ongoing work at the airport included the provision of new offices and a VIP lounge. Those facilities would come on stream during 2005. This all appears to have been part of the plan to prepare the airport for more extended commercial operations which, of course, was the ultimate objective.
At all events, FAL Aviation UK Limited was incorporated on 1 December 2004, Mr Lowings being responsible for the formalities in relation to that. According to Mr Deir, during the discussion on 9 December 2004, and after the matters concerning Mr Winskell had been completed and he and Mr Gardener had left the meeting, Mr Lowings raised the question of who were to be appointed directors of the new company. Mr Deir's evidence, as contained in his witness statement, was as follows:
"Mr Lowings asked who the directors of this company were to be and the level of their remuneration. The Sheikh then confirmed what had already been agreed, namely that I was to receive £20,000 per year for each company in which I was appointed a director by the Sheikh. It was understood that this was entirely separate from any remuneration to which I was entitled through LAA.
It was agreed that the directors of FAL Aviation (UK) Ltd would be Mr Al Nouti and I. Mr Lowings produced appropriate forms then and there which were then completed later
."
Mr Deir is thus suggesting that the Sheikh confirmed what had been said at their meeting on or about 21 December 2003 (see paragraph 36 above) in the presence of Mr Lowings and Ms Lobb. I will review what each has said about this issue shortly, but it is, perhaps, important to note the context of this meeting. There is no doubt that, whatever disappointment Mr Deir may have felt about the outcome of the discussions concerning his remuneration package as Managing Director of LAA, he had throughout 2004 applied himself conscientiously to the primary objective of moving things forward at Lydd with a view to obtaining planning permission and broadening the commercial operation there. In other words, he was doing precisely what the Sheikh wanted him to do. It must equally be said that he continued with this approach for at least the next two years. It was not until during 2007 that the Sheikh appeared to question the progress being made (see paragraph 85). It follows that, so far as one can judge, the relationship between Mr Deir the Sheikh was good at and throughout this time. Indeed it must have been good because Mr Deir was appointed, not merely to a directorship of FAL Aviation UK Limited, but also to two other companies.
Ms Lobb has produced a copy of her handwritten notes from which, in due course, a typed minute was prepared. She says that when Mr Deir left LAA she assisted him in taking copies of documents that might be of assistance to him, one such document being these handwritten notes. She says that the original version of the minutes and the original version of the manuscript notes were left in the FAL Group file at the airport. Indeed the assertion that it was left at the airport was made on several occasions in the inter-solicitor correspondence during 2009 and in the run-up to the trial. The Defendants have not apparently found the original and, accordingly, it has not been possible to see how the handwriting was applied to the paper. Although Mr Lewis has suggested that Mr Deir had not previously been forthcoming about precisely where the original of this document would have been left, and indeed went so far in his Closing Submissions (although not in his cross-examination of her) as to suggest that Ms Lobb "concocted" her evidence about this, it seems to me abundantly plain (certainly having regard to the evidence of Mr Lowings) that there was an original version created at the time of the meeting. Given the evidence of Mr Lowings it is very likely that the original was indeed in exactly the same form as the copy available in these proceedings. Furthermore, I cannot see what motive there could have been for not leaving behind the original: its existence would surely assist in the presentation of the claim for director's fees in the event of it being disputed. At the time of Mr Deir's departure, there is little doubt that litigation was on the horizon.
At all events, the minute was not circulated to anyone else at the time and the first time it was sent to anyone was when it was sent to Mr Al Nouti on 18 February 2008 (see paragraph 88 below). Against that background and given the recriminations that have abounded in more recent times, one could see how the allegation could easily be made that the minute was, to borrow a suggestion previously referred to, fictitious. However, if that was to be so, the "fiction" had crystallised by no later than 19 January 2005 and Ms Lobb would have been complicit in creating it. I say this because the typed version of the minute in which specific reference to this aspect of the meeting appears was completed no later than 19 January 2005. That is demonstrated conclusively by the electronic record of the "properties" for this particular electronic document contained in the relevant folder on Ms Lobb's personal computer. That folder contains two electronic documents, one entitled 'Meeting with Sheikh Fahad in London' (the date on which it was modified being 20 December 2004) and the other was entitled 'Meeting with Sheikh Fahad LAA' and was modified on 19 January 2005. Ms Lobb undoubtedly treated the overall meeting as being divided into two, the first part involving Mr Winskell and Mr Gardener, but the second part not involving them. Her notes suggest that the first part of the meeting was between 09.30 and 12.05 and the second part of the meeting was between 12.15 and 13.00
Her evidence, which on this issue I have no reason to doubt, was that she probably typed up the minutes of both parts of this meeting on or about 20 December. She would then have submitted them to Mr Deir for approval, giving him both her typed version and her handwritten notes. The first typed version of these minutes contained the following under the heading FAL Aviation UK Ltd:
"ZD explains to SF that the company has already been established but we need to appoint a director and a secretary.
ZD recommends that it shouldn't be SF or Badar, he thinks the company should be owned by Lydd Holdings Ltd, in the British Virgin Islands.
JL said he needs instructions regarding who he would like to be appointed.
ZD appointed as Director and Secretary and Adel Al-Athel appointed as Director.
JL said that this can now be done and handed over to ZD."
That became amended to produce the final version which was in the following terms (the amendments being highlighted below, though not highlighted in the original document):
"ZD explains to FAL that the company has already been established but we need to appoint a director and a secretary.
ZD recommends that it shouldn't be FAL or Badar, he thinks the company should be owned by Lydd Holdings Ltd, in the British Virgin Islands.
JL said he needs instructions regarding who FAL would like to be appointed and their remuneration for directorship.
FAL said that we have already agreed to pay ZD £20,000 per year per company.
ZD appointed as Director and Secretary and Adel Al-Nouti appointed as Director.
JL said that this can now be done and handed over to ZD."
Other amendments were made to other aspects of the minute, though not in any material respect.
Ms Lobb said the following in her witness statement:
"I can say with certainty that the manuscript version of the minutes taken by me at the meeting were not altered by me subsequently. The amendments that I made to the minutes had their origin in the manuscript notes and reflect what was said at the meeting I had merely omitted certain matters when typing up the first version of the minutes, not an uncommon occurrence."
The handwritten notes from which the minutes were produced contain the following entries relevant to the issue:
"JL needs instructions
Who would you like? £? SF - £20kpypc
ZD. Direc/sec Adel - Director
JL get done handed over ZD"
The handwritten note "SF - £20kpypc" at the side of the question is interpreted as meaning that the Sheikh said that Mr Deir would receive £20,000 per year per company. As I have observed, the original of this document has not been located and, accordingly, it has not been possible to see whether that expression might have been added subsequently. I note that in a letter from the Defendants' solicitors to Mr Deir's solicitors dated 29 June 2010 it is said that what has been disclosed "purports to be a contemporaneous handwritten version of the Minutes" and that there would be cross-examination about this.
When cross-examining Mr Deir, Mr Lewis did indeed suggest to him that either he or Ms Lobb on his instructions added those words or that expression after 9 December. He made the same suggestion to Ms Lobb when she was cross-examined. Both adamantly denied the suggestion. Ms Lobb said that what was on the copy handwritten note was what she wrote at the time.
At that stage, all that Mr Lewis had by way of effective instructions on the issue (apart from the generalised suspicion that his team will have had) was what the Sheikh and Mr Lowings said about the meeting. The Sheikh said this in his witness statement:
"I am now aware that Mr Deir asserts that at a meeting which occurred on 9th December 2004 at 24 Basil Mansions, in London (a property that I own), that I confirmed that I would pay Mr Deir the sum of £20,000.00 per year for each company for which he acted as a director.
To the best of my recollection, the issue of directorship fees or the wider question of Mr Deir's remuneration was not discussed at this meeting.
The purpose of the meeting was to discuss various matters arising out of my decision to increase the number of shares that I owned in the airport , that is to say to purchase more shares from South East Airports Ltd. There was also discussion of the on going management and development of the Airport.
I have seen a copy of the Minutes
These Minutes were not circulated after the meeting. I did not see a copy of the Minutes until Mr Deir presented them to me at the meeting I had with him on the 19th August 2008. I am now aware that Mr Deir had sent these Minutes to Adel previously. I have also seen handwritten notes
which are alleged to be an accurate record of the meeting. The handwritten notes make reference to "SF £20pypc" which I am told is alleged to be a reference to me agreeing to pay Mr Deir £20,000 per annum per company when he was appointed a director. As I say, I do not believe that I agreed to this, therefore, the minutes must be inaccurate."
Whilst that does, of course, raise the question of the accuracy of the minutes, it is not the most categorical refutation of what is alleged.
In his witness statement, having confirmed that he recalled Ms Lobb taking notes, Mr Lowings said this:
"I cannot recall ever being provided with a typed copy of the Minutes
until the e-mail dated 22nd August 2008.
The Minutes that [Mr Deir] relies upon are lengthy and cover a number of different subjects. I am, of course, aware that the crucial issue, so far as these proceedings, is the question of directorship fees. So far as I can recall, there may have been some discussion between [Mr Deir] and Sheikh Fahad about remuneration. This could have been about directorship fees but I am not sure. I do not recall what figure was discussed, nor can I recall whether [Mr Deir] and Sheikh Fahad reached a concluded agreement.
The Minutes that [Mr Deir] relies upon
state that I initiated discussion about who were going to be the directors of FAL Aviation. I am not sure that I would have not asked Sheikh Fahad directly about this. I had already asked [Mr Deir] for the relevant information in my letter of 2nd December 2004. Further, I am quite sure that I would not have asked Sheikh Fahad about remuneration for the directors. This was not information that I required to complete the forms to Companies House. Remuneration was irrelevant to me.
As I have already said I have no recollection about the specific figure being discussed, but I cannot rule out the possibility that there was some discussion about remuneration. However, I do not believe that the Minutes that [Mr Deir] relies upon are accurate for the reasons I state above."
I should say that when the Sheikh gave oral evidence about this meeting, whilst he said that he remembered it, he did not recall Ms Lobb being present at all and he did not recall a discussion about directorship fees. He thought the meeting was a short meeting.
When Mr Lowings came to give evidence there was quite a significant move from what he had said in his witness statement. He said that he had been thinking about the case carefully and in a focused fashion over the days before he gave his evidence (and had listened to some of the evidence in the case as it unfolded). He said that he did now remember Mr Deir raising the question of remuneration with the Sheikh. He recalled a figure of £20,000 per company being mentioned and being put to the Sheikh as a suggestion with which Mr Deir was, he said, trying to get him to agree. He said that "certainly" there was no concluded agreement (something he said in his witness statement that he could "not recall"), but that he did remember the proposal, as he described it, being put. He repeated that "certainly" there was no deal done. He gave his evidence during Wednesday, 13 October, and had apparently realised his current recollection of the meeting during the Monday night. However, the first the court and Mr Hill-Smith for Mr Deir, knew about this was when he gave some evidence in chief and when he elaborated on his account in cross-examination.
Leaving aside, for the moment, the precise way in which the conversation took place, this was the first occasion when any witness called on behalf of the Sheikh had acknowledged that there was express reference at this meeting to a figure of £20,000 and that the figure was raised as being one applicable "per company". This is, of course, precisely what Ms Lobb's note says and precisely what Mr Deir has been saying for a good while was the agreement not, I should add, simply a proposal to this effect.
If there were lingering doubts about the authenticity of Ms Lobb's handwritten note (in the sense of when the expression referred to in paragraph 74 above was placed upon it), this evidence from a respectable source would help to resolve those doubts. Having heard the evidence given, there is no doubt in my mind that it swung the pendulum back in Mr Deir's favour in relation to his credibility on this issue. However, before reaching a final view on the whole question, there are two other areas of the evidence I need to review: first, the response by or on behalf of the Sheikh to the claims advanced by Mr Deir on the basis of the alleged agreement; second, Mr Deir's own handwritten note to which I referred in paragraph 37 above.
The response to the claim has never been an unequivocal denial that any agreement of the nature suggested by Mr Deir was ever made. The Sheikh has usually said that he "does not recall" making any such an agreement and Mr Al Nouti, on the Sheikh's behalf, has effectively said that it is highly unlikely that any agreement of this nature would have been made. Drawing on his own experience he said this in his witness statement:
"I am a statutory director of a number of Companies in which Sheikh Fahad has a controlling interest. These Companies are incorporated in various jurisdictions throughout Europe and the Middle East. I play an active role in some of these Companies. However I have never received a payment from Sheikh Fahad for holding the office of Director. There are no directors, who at the same time are employees within the FAL Group, that receive such a payment, and I would know because I am entrusted by Sheikh Fahad with management of the Group's financial affairs."
He says that he is sure that the Sheikh would have told him about the agreement had it been made.
The backdrop to the advancement of the claims for director's fees is what, on Mr Deir's case, was the deteriorating relationship between him and the Sheikh starting in about the middle of 2007. It is not in dispute between them that the Sheikh was asking him to make some personnel redundant as part of a cost-saving exercise, presumably in response to the considerable delays in achieving the development of the airport which the Sheikh thought would have been much more speedy than it was. Mr Deir was resistant to these suggestions and as a result, he says, relations soured, including relations with Mr Al Nouti, the Sheikh's financial controller. I will be dealing with aspects of this in connection with the various counterclaims made, but merely note the position for present purposes. I think, however, that this is a convenient point at which to note the terms of the resignation letter that Mr Deir sent to the Sheikh on 2 August 2007. In due course, the resignation did not take place during 2007, but the phraseology is worth noting:
"Please consider this letter as my one month resignation notice, from the following positions within the group.
- London Ashford Airport (Managing Director and a Director of the company)
- Lydd Golf Club (Managing Director and Director)
- Fal Aviation (Managing Director and Director)
- Basil Properties (Director)
- Swailand (Director)
- Barton House 41 (Director)
- Lydd Air show (Director)
- Prince Sultan House
The reason being that I [cannot] agree with your decision to dismiss more employees at the airport and to cancel the air show for this year.
I believe your decisions at this stage are very hasty and will not serve your developments, and investments, and I would not like to be part of it. We have made commitment to our employees, to the local authorities and the local people.
I appreciate that the funds are tight and you do not wish to carry on with the development, but it must be said that a decision like this will even cost you a lot more in depreciation cost than the monthly losses we are incurring. It would be much better to put the airport on the market has (a going concern) and you will get a much better return than just to reduce its capability. Just remember that our investment has been in the employees not only in the tangible [asset].
Kindly arrange to appoint a representative in order to process the handover of all my responsibility and obligations. In the meantime I will on all my duties and responsibilities until such time.
I thank you for your support and the opportunities you have given me over the years."
For this purpose, the story can be taken up again on 26 November 2007 when Mr Deir received a communication from Mr Al Nouti asking him to make changes in the directorships and operational status of four companies: Lydd Golf Club and Driving Range Limited, FAL Aviation UK Ltd, Lydd Airshow Limited and Basil Property Company SA Limited. The communication, sent on the instructions of the Sheikh, asked for Mr Deir to be replaced as a director in respect of two of the companies and asked that the other two companies be "closed".
It does, perhaps, need to be understood that following the resignation letter to which I referred above, discussions took place about the potential sale of the airport. Shortly prior to the letter of 26 November 2007 referred to in the preceding paragraph, Mr Deir wrote to the Sheikh on 2 November 2007 in the following terms:
"As we are progressing with the sale of Lydd airport, and finalising the other UK projects, I believe this is a good time to discuss my future role with the group and the remuneration package (severance pay) for my services and the sale of Lydd airport.
The new owners would expect that all present directors to resign and new directors from their side to be installed.
As you are fully aware that I have developed Lydd airport to its present status and placed it as a marketable airport in the UK markets and beyond, plus creating the supporting companies i.e. Fal Aviation and Phoenix Aero Engineering to enhance its status.
Over the last four years it has been a struggle for me, whereby I was fighting with all the stakeholders, the local and regional authority for the expansion plans on one side and on the other side trying to keep you on board and in support of the operations and the expansions plans.
My determination to keep the project going by defying your decision to make more employees redundant and reduce the size of the operation, to the extent that I had to go to the most extreme situation and you as my resignation as final persuasion tool to keep you in support so we do not destroy what we have managed to achieve, and you do not lose out on your investment, I am glad to say that it has paid off, and now you are satisfied with the result.
Now the purchase of the airport and the support companies are well underway, I would like to propose the following is my remuneration package,
- finding buyers in negotiating the sale £450,000 being
1.5% of the purchase price
- shortfall of salary payments £200,000 for four years
-
severance pay £62,500 being £10,416 per month for six months
- unused holidays £19,160 being £479 per day for 40
days
I have also agreed with the buyers to leave the following items outside the purchase agreement.
- Single Engine prop plane, No Book Value, I would like to Keep
Also I am trying to bring in an extra one million to the deal whereby the buyers will cover the outstanding overdraft facility with HSBC so you do not end up paying this amount out of the 30 million sale price.
I would like to determine my future role within the group on other projects, once this deal has been concluded
."
In reply to the letter of 26 November 2007 Mr Deir sent an e-mail to Mr Al Nouti on 7 December 2007 effectively agreeing to the requests contained in it. The final paragraph of his e-mail said that "an invoice for my directorship for all companies will follow in due course." He followed this up in a letter dated 18 February 2008 the material part of which read as follows:
"Please find below the list of my directorships with all the companies related to FAL group.
As per the attached minutes as agreed with Sheikh Fahad in our meeting on 9 December 2004 at his Flat 14, Basil Mansions. My remuneration was fixed at £20,000 per directorship per year on past or any newly established companies.
According to the above calculation the outstanding amount owed to me so far is £355,000.
I would highly appreciate it if you made the arrangements to transfer the above-mentioned figure at your earliest convenience."
The letter contained a table of the directorships and the basis upon which the claim for £355,000 was put forward. The contents of the table are reproduced below:
Company name |
Start date |
Termination date |
Time |
London Ashford Airport |
31/12/2002 |
Current |
62 months |
FAL Aviation |
11/12/2004 |
Current |
38 months |
Phoenix Aero Engineering |
10/ 01/2007 |
Current |
13 months |
Lydd Air Show |
08/11/2005 |
Current |
27 months |
Lydd Golf Club & Driving Range |
04/10/2005 |
Current |
28 months |
Lydd Golf Limited |
04/10/2005 |
30/11/2007 |
25 months |
Basil Property Companies |
19/12/2006 |
31/08/2007 |
20 months |
Whether the claim was justified or not, it was certainly articulated clearly enough for it to be understood and responded to. However, there was no response to it until Mr Al Nouti sent a fax to Mr Deir on 27 May (just over three months later) asking him to "send to us a copy of the directorship agreement for our reference and analysis". Mr Al Nouti, who said in his witness statement that he very much doubted whether the Sheikh would have made any such agreement, said that he "sat on the letter and did not do anything with it" until as, he put it, the subject came up again. He said that, whilst the e-mail from Mr Deir said that the Minutes were attached, he was "not sure whether they were". He did not positively assert that they were not attached. If they were not attached, why did he not draw attention to the omission and request that they be sent?
I am bound to say that it seems very odd that a request for payment for £355,000 should simply be ignored in the way that it was and I find it impossible to accept that Mr Al Nouti did not discuss this with the Sheikh at this time. The Sheikh undoubtedly made all the important decisions within the FAL Group and here is one of his most loyal and long-standing employees saying that he entitled to a very substantial sum of money on the back of a personal commitment by the Sheikh. The Sheikh became involved personally when Mr Deir was asking for a proper remuneration package in the early part of 2004 (see paragraphs 44-46 above). All that was required was a telephone call from the Sheikh to Mr Deir telling him firmly that he well knew that he (the Sheikh) had made no such commitment and that he (Mr Deir) was dreaming something up. However, nothing of the sort happened.
At all events, in response to the fax of 27 May, on 28 May Mr Deir attached the minutes of the meeting of 9 December 2004 to a further e-mail. There was no response to this e-mail from Mr Al Nouti. He (Mr Al Nouti) says that he had noted that the Minutes were not signed by the Sheikh. Nonetheless, upon receipt of these minutes he says that he believes he then mentioned to the Sheikh the claim that Mr Deir was making, but the Sheikh said that he "had no recollection of reaching any such agreement with Mr Deir." I am unable to accept that this was the first time Mr Al Nouti mentioned this issue to the Sheikh.
Nonetheless, by this time a number of issues had been joined between Mr Deir and Mr Al Nouti to some of which I will have to refer later. However, in an e-mail of 1 July 2008, which covered a number of matters, in relation to the issue of directorship fees Mr Deir said this:
"This matter has been brought to your attention over three months ago and you have asked me for a support document which I have supplied you with, I need a full settlement as per the agreement. Should you wish to choose otherwise I need your response in writing and your reasons."
That e-mail was copied to the Sheikh's personal e-mail address. Although the Sheikh suggested that this was not his e-mail address when he gave his evidence, Mr Al Nouti confirmed that it was. (I note from paragraphs 34 and 55 of Cranston J's judgment that Mr Deir managed to forward an e-mail direct to the Sheikh on 3 March 2008.) Again, there was no reply to this e-mail. Mr Al Nouti did not refer to Mr Deir's e-mail of 1 July 2008 in his witness statement.
In the meantime there had been exchanges of e-mails between Mr Deir and Mr Al Nouti about various matters, but on 1 August 2008 Mr Deir sent an e-mail to Mr Al Nouti which contained the following paragraph:
"In the meantime I will instruct our accounts department to calculate my final settlement with LAA to include my directorship fees with other companies which will be sent to you for review and the Sheikh's approval."
A meeting took place on 19 August 2008 attended by the Sheikh, Mr Al Nouti and Mr Deir. An unsigned minute of the meeting (probably prepared by Mr Al Nouti) included the following paragraph:
"ZD brought out his claim for directorship fees from FAL
. FAL said he cannot remember the agreement and the meeting that was held on 9 December 2004. ZD had previously submitted copy of the minutes of 9 December 2004 with his directorship claim, the minutes were taken by Miss Heather Lobb (PA to ZD at Lydd Airport), and was attended by John Lowings (Lawyer). FAL also mentioned that he did not remember Heather taking the minutes on that day. ZD tried remind FAL about some events of the meeting but FAL insisted that he could not remember. FAL said this issue should be discussed and finalised between ZD and AN, FAL will accept the outcome."
It is unclear to what extent, if any, there was any further discussion between Mr Deir and Mr Al Nouti concerning the directorship fees after that meeting, but on 17 September Mr Deir sent to him (with a copy to the Sheikh) an e-mail concerning his departure from Lydd Airport as of the end of September. In relation to the claim for directorship fees, he said that this was "an agreement directly between Sheikh Fahad and myself supported by the minutes of 9 December 2004" and he asserted that the claim would remain open and he insisted on reaching a settlement in order to finalise the matter amicably. He also indicated that he was holding certain funds arising from the sale of the Boeing 727 "as a down payment towards [his] directorship fees". He sent an updated calculation of his claim for directorship fees in a sum just short of £395,000.
On 16 October 2008 the solicitors first instructed by Mr Deir wrote to the Sheikh dealing with certain matters in contention including the outstanding claim for directorship fees which were then asserted to be approximately £480,000 which is the amount of the claim advanced in these proceedings.
This review of the period from the beginning of 2008 shows that, as I suggested above, there has never been an unequivocal denial that an agreement of the nature suggested by Mr Deir in relation to director's fees was ever made. Why not, one asks?
Whilst none of the foregoing of itself proves that a commitment by the Sheikh of the nature suggested by Mr Deir was made, it adds to a picture being created by those close to the Sheikh (and, for this purpose, I include Mr Lowings) that there was rather more to the suggestion made by Mr Deir than the Sheikh has been prepared to acknowledge expressly. Mr Lowings' recollection of the specific sum of £20,000 per company puts paid to any question that might have been raised in my mind about the figure being dreamed up "out of the blue" at some stage: it was plainly a figure that was mentioned in conversation.
I will return now to the issue that I said I would leave until later, namely, Mr Deir's own handwritten note of the meeting he claims to have had with the Sheikh on or about 21 December 2003.
The way he put the matter in his witness statement was as follows:
"I had a further meeting with the Sheikh on or about 21 December 2003 in his office. On this occasion, only the Sheikh and I were present. The purpose of this meeting was to discuss my future role in the UK working for the Sheikh. We discussed the Sheikh's interests in the UK generally. That evening after the meeting, I wrote out some notes as a reminder to myself of the points that we discussed. These notes do not have a precise date on them; they refer to "December 2003". I am relying on memory when I say that the meeting took place on 21 December 2003 it is possible it was a day or two days later. It was definitely after 20 December 2003 and before Christmas. Once I had prepared these notes, I put these notes with some other papers which I brought with me to the United Kingdom. These notes were on loose pieces of paper which unfortunately I have now lost. I made other notes of [meetings] from this time in notebooks and I have retained and given disclosure of these notes. Obviously I did not keep notes at which an official record was being kept."
I will indicate the circumstances in which this handwritten note came to be disclosed in these proceedings shortly, but the terms of the note itself should first be recorded. It was in the terms that appear below. I have corrected some of the miss-spellings that appear in the original and those appear in square brackets. Some missing words are added in square brackets to give meaning to the note. 'FAL' is a shorthand way in which the Sheikh is often referred to. 'DG' refers to David Gardener (see paragraph 25 above) and MW to Mr Winskell. Barton House 41 is a reference to a company formed to promote a property venture of the Sheikh. The note is as follows:
"Meeting with FAL - Riyadh. Dec. 03
- FAL indicated that he wants MW to be removed from the position of director on all UK projects
- Fal does not [want] MW involved with the Airport as he does not like him and he is not the right man for the job.
- Fal would like me to take all MW positions but it has to be done in a way [without upsetting] MW as he has a letter from fal to give him the right to 10% of LAA capital gain and he [needs] to get that letter from him first.
- ZD to [coordinate] with DG to get All information about [Champneys] and Barton house 41 ([Swaylands]) and follow up on the progress.
- Fal indicated that DG is good but too slow in getting things done
- ZD will [receive] £20,000 per year from his directorship as and when he is [appointed] on every [?sector?] company in the UK
- FAL indicated MW is costing him too much money.
- ZD informed fal that he will do [whatever] is needed to get the job done
- ZD indicated that the LAA contract needs to be discussed and [finalised].
- Fal [asked] ZD to come back the second day and he will talk about it, as he need to see other people.
- meeting ended."
The only version of this document that appears in the court papers is a photocopy. That fact, plus the circumstances in which the existence of the document came to emerge, undoubtedly invites very considerable scepticism as to its authenticity. It was, it is said by Mr Deir, created in December 2003 and, of course, this whole claim is based upon a commitment said to have been made then. How did it not emerge when Mr Deir started raising the claim in a formal way at the end of 2007 and during 2008? Throughout that period it is fair to say that the only meeting upon which reliance was placed was the meeting on 9 December 2004. Indeed the first letter written by the solicitors first instructed by Mr Deir after he left Lydd Airport (see paragraph 98 above) referred only to that meeting. I will return to Mr Deir's explanation for this shortly, but notwithstanding that general observation it is also fair to say that by the time the Particulars of Claim in this action came to be pleaded, the claim was being advanced on the basis that the agreement concerning director's fees was made on 21 December 2003 and confirmed at the meeting on 9 December 2004. In other words, between the letter of 16 October 2008 (see paragraph 98 above) and the service of the Claim Form on 27 January 2009, Mr Deir must have given express instructions to this effect. It is right to say, however, that only the minute of the meeting of 9 December 2004 was referred to expressly in (and annexed to) the Particulars of Claim.
The giving of express instructions concerning the alleged meeting on 21 December 2003 would suggest that Mr Deir had some specific recollection of that meeting (unless, of course, it was something he dreamt up in the meantime). Equally, if he had a document evidencing such a meeting, it would be surprising if he did not remember its existence (albeit several years after the event) and/or was not asked by his legal advisers at the time whether he had any documentary support for his recollection. Given that it was, on any view, purely a personal document in the form of the aide-memoire, I could understand why it might not have been referred to expressly in the pleadings whilst the minutes of the meeting of 9 December 2004, albeit not circulated at the time, were at least by the stage of the proceedings in wider circulation. However, it appears that the document said to evidence the meeting on or about 21 December 2003 was not discovered until some 6-8 weeks after the Defence to Counterclaim in this action was filed. The Defence to Counterclaim was served on or about 27 March 2009.
Mr Deir's evidence was that the document was only discovered whilst he was looking through documentation relevant or potentially relevant to the litigation ultimately heard by Cranston J in March 2010. It is to be presumed, therefore, that his case is that he had forgotten about it until it was thus found.
If it was discovered in about the middle of 2009, it is a legitimate comment that it would be expected to have been disclosed in the original List of Documents dated 14 December 2009 or at least referred to by either Mr Deir's first set of solicitors or his present firm of solicitors before the document eventually emerged. As I understand it, its existence was first disclosed in a Supplemental List of Documents sent on 23 June 2010 and a copy of the document was provided to the Defendants' solicitors on 12 July 2010.
When the Defendants' solicitors raised questions about all this, they were told that the original document had been discovered, as I have indicated, some 6-8 weeks after the Defence to Counterclaim was served and that the original was first given to Mr Tony Lawson, the solicitor then acting for Mr Deir, who took a copy and gave the original back to Mr Deir. Mr Deir then provided the original to his present solicitors who themselves took a copy, but either they have or Mr Deir has since then mislaid the original.
I am bound to say that all this is very unsatisfactory and it is quite obvious why the Defendants have made so much of the issue. I do, however, understand that Mr Lawson died suddenly during 2009 and that, of course, may have had a bearing on the preparations for this case (and indeed the other litigation). It would not, however, explain the loss of an important original document at sometime between June 2010 and a few weeks later.
Mr Lewis has made a fair point that the story about when the document was first discovered and handed to Mr Lawson is nothing more than assertion and there is no statement from someone within that firm indicating what is recorded by a perusal of the file. That might, of course, have been difficult in Mr Lawson's absence and, equally, might have raised issues of legal professional privilege. It is also said that there has been no unequivocal statement or assertion by his present solicitors that someone within that firm saw the original of the document, took a copy and handed back the original to Mr Deir. However, numbered paragraph 2 in the letter from his current solicitors to Messrs Hallett and Co dated 26 August 2010 can probably be taken to be such a statement or assertion.
The real question is whether the suspicions that arise from the way this document has emerged and how the original has "gone missing" undermines significantly Mr Deir's case on this overall issue. If this case had stood solely on this document, I think I would have been minded to say that it was too suspicious to be given credence. However, it seems to me (as I have already hinted) that it gains some credibility as a document from what seems to me to be a fairly persuasive case derived from all the evidence surrounding the meeting of 9 December 2004 (particularly in the light of what Mr Lowings has now said about it), the failure on the part of the Sheikh unequivocally to deny that he made such a commitment and, allied to that, the failure to refute the claim adequately (or indeed at all) after it had been put forward on a number of occasions by Mr Deir.
If that gives the document some intrinsic credibility, then the question might be asked whether its contents either strengthen or undermine Mr Deir's case. Is there anything in the document that either helps to show that it was composed at or about the time Mr Deir says that it was composed or is there anything in it that suggests otherwise?
The short point, it seems to me, is that if one left out the line in the document that deals with the alleged £20,000 per annum director's fees, everything else does fit in quite well with events that were happening in December 2003. The Sheikh wanted Mr Deir to come to the UK and effectively take over Mr Winskell's responsibilities. The Sheikh needed to extricate himself from the agreement that gave Mr Winskell a percentage in the profits of Lydd Airport. (Incidentally, Mr Deir noted in his handwritten document that the percentage was 10% which was not, of course, what the agreement was: see paragraph 55). That was something that would have to be handled with sensitivity and, as events turned out, it was not achieved finally until December 2004. The Sheikh's interests in Champneys and Barton House 41 were matters that were also to be followed up and dealt with. Again, it appears that these issues were eventually finalised in December 2004, Mr Deir having been referred to in an internal FAL Group memorandum dated 20 October 2004 from the Sheikh, who was President and Chairman of the Board, as "[General] Manager of Lydd Airport [and Representative of the President] for UK Projects". Overall, the document relied upon by Mr Deir has the hallmarks of a document produced at or about the time he says it was produced, though I am not sure that I can accept that it was produced, as he says, on the evening of or the day after the meeting to which it related. If that had been so, I would have expected to see the precise date of the meeting recorded on the document, or the precise date of the note itself to have been recorded on the note. Furthermore, the use of the expression "come back the second day" rather suggests to me that this document was created somewhat later. However, it generally has a "prospective" flavour about it and I consider that it was probably created soon after the meeting to which it relates.
Having said that, I cannot wholly exclude the possibility that the document was created much later (even as recently as 2010). Indeed I cannot wholly exclude the possibility that it was created in order to be able to suggest that the Sheikh made the commitment suggested before Mr Deir left Saudi Arabia rather than, as might have been suggested, at the meeting on 9 December 2004. By then, of course, Mr Deir would have been working in the UK for nearly 12 months on a salary that he did not regard as adequate with no immediate prospect of planning permission on Lydd Airport being achieved (and thus no prospect of a generous bonus). There might have been an incentive on Mr Deir's part at that point to try to persuade the Sheikh to pay him more by virtue of the directorships to which he was to be appointed. Had the Sheikh had a clear recollection to that effect about the discussions on 9 December, but that he had rejected the overture from Mr Deir, I might have been disposed to accept it as inherently likely. However, as I have emphasised before, the Sheikh's attitude throughout has been that he "cannot recall" making any commitment about director's fees and he has very little recollection, he says, of the meeting on 9 December. Although Mr Lowings has ventured the view that no agreement was concluded at that meeting, given his focus on the meeting about which he spoke when giving his evidence, I think he would have been able to recall more precisely the Sheikh's response if this had been the way in which Mr Deir had approached him. Without such a precise recollection I am unable to place any significant weight on this impression even though I acknowledge that the "impression" of an experienced solicitor might, in some circumstances, be of assistance. However, as I have indicated (paragraphs 78 and 80), he was unable to recall whether a concluded agreement was reached at the time he first thought about the matter when his first witness statement was put together. However, having observed the way in which Mr Lowings' evidence was given, I sensed that, having recognised that he did recollect reference to the figure of £20,000 in the way I have described, he felt he had to maintain strongly that there was no agreement about it which was not how he expressed himself in his witness statement. I regret to say that I cannot regard his evidence in that respect as persuasive.
However, the interpretation (probably prompted by Mr Deir) of Ms Lobb's note (which I accept she completed in its entirety at the time of the meeting) was that the Sheikh said that "we have already agreed to pay ZD £20,000 per year per company" (my emphasis), not that it had just been agreed at that meeting. That lends credence to the proposition that there had been an earlier commitment to the payment of director's fees which, of course, is what Mr Deir's handwritten document evidences. Mr Deir certainly appears to have been of that view no later than 19 January 2005 (see paragraph 68 above).
Doing the best I can, therefore, on material that is not easy to evaluate, I think it is more likely than not that the Sheikh did make a personal commitment to Mr Deir that he would be paid at the rate of £20,000 per annum in respect of companies to which he was appointed after he went to the UK. (I will say a little more about what this meant shortly.) I consider that he did this as an incentive to Mr Deir to go to the UK where he would be paid less for working at Lydd Airport than he had been paid whilst working in Saudi Arabia. Whilst the issue was inevitably not discussed in the evidence, I suspect that the Sheikh knew that a greater salary than that offered could not be justified at that time and that ultimately, if planning permission was achieved, Mr Deir would become entitled to a very large discretionary bonus. However, some incentive to him (given his family commitments) was going to be necessary to induce him to go to the UK and undertake the important roles that the Sheikh had in mind for him. Given that Mr Al Nouti, as he himself has emphasised, and others within the FAL Group, did not get directors' fees for their involvement in other companies probably explains why Mr Al Nouti was not brought "into the loop" about this proposal - and why, until he was forced to make the claim, Mr Deir did not mention it to him. I suspect that the Sheikh hoped that the question of director's fees would not emerge because the planning permission would be achieved quickly and the large bonus paid. However, when the planning permission did not emerge and the relationship with Mr Deir became difficult, the request for payment of the director's fees became something of an embarrassment. That is why, in my judgment, no concession has been made that any director's fees are due, whilst an outright denial of the claim has never been put forward by the Sheikh personally. His attitude, consistent with his general attitude to business, is that if it is shown that he made any commitment to this effect, he would pay.
The general considerations to which I have just referred also explain, in my view, why Mr Deir did not seek to pursue the claim until it became plain that he was not going to remain with LAA during a period when planning permission might be obtained. He too might have been prepared to let this commitment die a death if that had occurred and a substantial bonus was paid, and the commitment represented something of an insurance policy if things did not work out in that way. Whilst, of course, English law is accepted by the parties as the law that governs the commitments made in this case, the context is that of a deal between two men who at the time were negotiating in Saudi Arabia with the approach to business of those experienced in the ways of that part of the world. I do not sense, certainly in the context with which this case is concerned, a culture of constantly "badgering" for payment even though a binding commitment to pay has been made and recognised.
The effect of the agreement
Mr Lewis submits (correctly, of course) that even if a discussion about directorship fees is found to have taken place, the effect of the discussion must amount to a contractual commitment satisfying all relevant contractual requirements. He has made a number of submissions in the context of this general proposition including the submission that the terms of the agreement must be considered as too vague and that, certainly in respect of certain companies, the commercial purpose of any such agreement is "nonsensical". He submits that the agreement pleaded is not reflected in any of the documents relied upon or in Mr Deir's witness statement.
I do not, with respect, think that pleading points are going to be helpful. I have to determine (a) whether what the Sheikh said was intended to have contractual force and (b) as a matter of law, what the common intention of the Sheikh and Mr Deir was, judged objectively. It is not, of course, for the court to re-write the bargain or interpret the words used in a way that the court simply considers reasonable. However, if a contractual intention is to be discerned objectively and the commercial purpose of the contractual intention can also be discerned by reference to all the relevant and admissible materials, then the court will endeavour to give effect to it rather than to render the agreement ineffectual.
As I have already indicated, I consider that what was intended by the Sheikh's commitment was that Mr Deir would be able to earn more in the UK than permitted simply by the remuneration package for his position as Managing Director of LAA. As at the time of their conversation the precise details of that package had not been discussed or agreed, but the Sheikh must have appreciated that he needed to provide Mr Deir with a financial incentive to transpose his life from Saudi Arabia to the UK. Each understood that subjectively and it is, to my mind, the obvious objective conclusion to reach also. The commitment was part of the consideration given by the Sheikh in return for Mr Deir agreeing to take on the duties at Lydd Airport. Given that the common intention was that Mr Deir should effectively replace Mr Winskell in relation to the Sheikh's other interests in the UK, there were already in existence corporate vehicles that in due course could be used for the purpose of enabling Mr Deir to earn this extra remuneration. The commitment also related to any future appointment: that seems to me to be the clear intention behind what was put forward and, at least at the time it was offered, was clearly understood by both parties. At all events, objectively speaking, that is what was agreed. I agree with Mr Lewis' submission that the intention could not possibly have been to embrace those companies where Mr Deir was to be appointed managing director and for which he was to be paid a salary. To the extent that Mr Deir has sought to claim in respect of his role as a director of LAA, he is, in my judgment, objectively speaking, not entitled to do so whatever he may have thought subjectively. Equally, I do not consider that it was intended, whether subjectively or objectively, that mere appointment as a statutory director, with no effective duties, would carry with it an entitlement to £20,000 per annum by way of director's fees. The Sheikh would never have agreed to that and Mr Deir must have understood that. Objectively speaking, there could be no sense in it. However, given the underlying intention of the agreement, it seems to me that where more than merely nominal duties were carried out, the fee would be payable.
So where, on that analysis, does that leave Mr Deir's claim for director's fees?
I do not consider that the claim in respect of LAA is sustainable for the reasons I have given (see paragraph 120).
The claim in respect of FAL Aviation UK Limited is sustainable, particularly since, on the evidence I have accepted, the Sheikh confirmed the £20,000 per annum figure at the time that the incorporation of this company was being actively discussed and implemented. That occurred in December 2004 and it is clear that Mr Deir was appointed a director of the company at that time. There is no clear evidence before me about what Mr Deir did in the role of director immediately upon appointment, but in his witness statement he emphasised that it was important to understand that "FAL Aviation was only officially launched and started to trade on 29 July 2005 after the offices and the VIP lounge was completed." On that basis, and consistent with the need for active involvement in the company before the director's fees became payable, it seems to me that the claim for director's fees relating to this company should be regarded as sustainable only from that date. So far as Phoenix Aero Engineering is concerned, the unchallenged evidence of Mr Deir is that he was the sole director and accountable manager of this company and that he was actively involved in its management. On that basis, and in view of my conclusions, he was entitled to director's fees from the time of his appointment as a director until his role of active management came to an end. The same applies to Basil Property Company SA Limited (referred to as 'Basil Property Companies' in the table set out at paragraph 89 above) which is a company in which, on his unchallenged evidence, Mr Deir played a part albeit at a relatively low level of activity (his oversight role in this company being admitted in any event), and also to Barton House (No 41) Ltd (see paragraph 103 above) in respect of which he became a director on 11 December 2004 shortly after the meeting on 9 December 2004. This latter company was not referred to specifically in the claim advanced in the letter of 18 February 2008 (see paragraph 88 above), but it did form part of the claim advanced in these proceedings. He was not asked why it was omitted from the claim advanced in February 2008 and was not challenged about his evidence that he "played an active role in Barton House (No 41) Ltd throughout its existence" and, for example, "was instrumental in recovering £1.6 million for Barton House from Oakdene which was then remitted to GAMA in Saudi Arabia." It seems to me that on the basis of my conclusions generally about the claim for director's fees, the claim in respect of this company is justified from the inception of his directorship until 26 September 2008 when his employment with LAA came to an end.
The position concerning the companies associated with the Lydd Golf Club is, to my mind, less clear. Mr Deir's own evidence is that the acquisition of the golf course and club facilities was an integral part of the planned expansion of the airport. It appears that he was appointed company secretary of each company on 22 December 2003 (which itself demonstrates that the discussions over his move to the UK must have been well advanced by then), but was not appointed a director until 4 October 2005. On the one hand, one could see this overall role with these two companies as simply part of what might be termed the "LAA picture" in the sense that it was, in real terms, merely part of the overall venture and Mr Deir's role at the airport as managing director was intended to embrace it. It has not been explained to me what changed, in a qualitative sense, after Mr Deir was appointed a director. However, his unchallenged evidence is that he was actively involved in the management of these companies and, since his appointment as a director for each company post-dated the meeting at which the commitment to the payment of director's fees was confirmed, I consider, on balance, that he is entitled to claim for those fees until his role of active management came to an end. So far as Lydd Airshow Limited is concerned, the evidence demonstrates that Mr Deir became a director on 8 November 2005. Two airshows took place during the period of Mr Deir's involvement at the airport, namely, on 9 and 10 September 2006 and on 1 and 2 September 2007. The second took place despite the Sheikh's earlier directive to Mr Deir that it should be cancelled. Indeed it was that directive that contributed to the rupture of relations between the Sheikh and Mr Deir. Although the second show took place, no further shows did take place thereafter and the inference to be drawn from the way matters proceeded after September 2007 is that no truly active management of Lydd Airshow Limited was required other than a short period of "run off" after that show. I am prepared to infer that it had effectively ceased trading, albeit that it had not been dissolved formally, soon after that second show. For convenience for calculation purposes, I would conclude that "active management" as I have further defined it in the Postscript to this judgment ceased by 9 November 2007 which means that this aspect of the claim must be restricted to two years.
The claim is, therefore, allowed on that basis and the necessary re-calculations must take place. Notwithstanding what I regard as some opportunistic submissions made by Mr Lewis (which I must assume were forced upon him by his instructions) following receipt of the draft judgment, those "re-calculations" involve calculating the sums due, not by reference to a completed year as a director, but by reference to a pro rata day-to-day basis. I will mention this again in the Postscript to this judgment at paragraphs 279-284 below.
I have not addressed directly the issue of whether these claims should be directed to the individual companies in respect of which the fees are due or whether the claim should be directed to the Sheikh himself. I have obtained the impression, rightly or wrongly, that that is not the sort of point the Sheikh himself would find attractive: if he is found to have made a commitment (which I have) it will be one he will wish to see discharged. In the broadest sense (and without addressing the issue on the basis, for example, of a collateral contract or the personal liability that can arise in this broad area under certain provisions of the Companies Act) this has to be seen as a personal contractual commitment by the Sheikh and indeed it was seen as such by Mr Deir. Leaving aside all legal niceties, there is no doubt that nothing of significance would be done (or left undone) without the sanction of the Sheikh. He would undoubtedly have had the effective power to sanction the formation of the company and to appoint someone as a director. I can well understand why Mr Deir's advisers have felt it a sensible precaution to take proceedings against the individual companies, but the reality is that this is the Sheikh's personal responsibility.
The counterclaim
I have indicated the broad nature of the counterclaims above (see paragraph 7). As I shall indicate below, some of the counterclaims are justified on a proper legal analysis: indeed Mr Deir acknowledges some of them. But all these counterclaims are advanced replete with accusations of bad faith, dishonesty, lying on oath and so on. The picture sought to be conveyed by the case advanced on the Sheikh's behalf is that from more or less the moment Mr Deir arrived in the UK he set about milking the set-up here for his own personal advantage and to the Sheikh's detriment. If that is so, it means that the loyal and trusted employee of at least some 8 years duration overnight turned into little more than a disloyal, dishonest and unscrupulous thief. Indeed there was a pleaded allegation of "theft" in the Defence and Counterclaim in relation to the alleged misuse of company funds. Furthermore, if this essential case is correct, Mr Deir was acting in this fashion whilst at the same time actively and successfully putting in place arrangements at the airport with a view to its ultimate expansion and development.
A sense of reality is necessary in this context. Until the Sheikh and Mr Deir disagreed about the way the Sheikh wanted to deal with things in the middle of 2007 then, subject only to one finding made by Cranston J in the case before him (see paragraph 13), there is no basis for thinking that Mr Deir was doing anything other than advancing as actively and effectively as he could the Sheikh's objectives for the airport. He (Mr Deir) knew that, if he succeeded, he would be rewarded handsomely. He did, of course, have to live and support his family in the meantime and there are a few areas where, on analysis, I think he pushed and indeed exceeded the limits of what he was entitled to do. But to suggest, as seems to be the suggestion, that virtually every step he took was for his own advantage and designed to take advantage of the Sheikh and the FAL Group seems to me to be far-fetched and missing the point by a considerable margin.
There is, perhaps, one factor that neither the Sheikh nor those around him in Saudi Arabia fully understood at the time of these events: a major planning issue such as the expansion of a local airport into a larger commercial venture can be a prolonged process in the UK. Leaving aside local issues, there are wider national considerations involved which, I imagine, is why the planning application has been "called in". The Sheikh's expectations of a rapid and favourable decision may have been misplaced and the evidence suggests that he became impatient about the lack of progress given the ongoing expenditure involved. From his perspective, that may be understandable; but it does not mean that the man he put in place to try to achieve his objective was doing a bad job (which, of course, is not suggested in any event) or was simply milking the situation for his own purposes.
Mr Deir says that from the outset he was given a free hand to run the company as he felt appropriate and his instructions were to do whatever was required to move the business forward as the whole development was based on obtaining planning permission for the runway extension and the building of a new terminal. He says that it was only after the disagreement between him and the Sheikh that increased focus was placed (particularly by Mr Al Nouti) on the internal operations of the company and matters about which there had previously been no substantial complaint became matters of concern. It is certainly right to say that no stone has been left unturned in tracing the documentation underlying the issues in this case with, for example, pages of credit card statements being copied. Indeed certain of the issues joined demonstrate a bewilderingly disproportionate attitude to these proceedings: at one stage Mr Deir was being asked to justify figures of £13 and £24 shown on his credit card statements as company expenditure.
I will start with the counterclaim arising in respect of the company, Jet Connections.
Jet Connections
The essence of the counterclaim is that this company was operating without the knowledge and authorisation of the Sheikh, that it used the premises and facilities of LAA without permission and made secret profits by soliciting work that it is said should have been dealt with by FAL Aviation UK Ltd (the 3rd Defendant). The work said to have been solicited was work for Sheikh Al Hamrani's company, Abdullah Al Hamrani & Co, a customer of SAMCO.
I will deal with the substance of this allegation shortly, but the point made by Mr Hill-Smith that seems to me to have some initial weight is that the work said to have been solicited was work of an aircraft-chartering nature, whereas the work of FAL Aviation UK Ltd related to aircraft handling at Lydd Airport: see paragraph 63 above. There is no evidence that this company was ever seen as a vehicle for aircraft-chartering work and, of course, it did not become operative until the end of July 2005. On that basis it is difficult to see what could have been lost by FAL Aviation UK Ltd even if the substance of the allegation was true.
At all events, as indicated previously, Jet Connections is a company that was incorporated in March 2004 by Mr Deir. In his witness statement he explains the background to the incorporation of this company in the following way:
"In March 2004, I arranged for a company to be set up called Jet Connections. This Company was set up with a view to promoting the chartering of the Sheikh's private aircraft, a Boeing 727 and a Legacy Embraer. My relations with the Sheikh were good and I informed him of what I was doing, which was going to be in his interests. In accordance with this, I entered into discussions with well known aircraft brokers and operators, Hunt and Palmer (based in the UK) whereby Hunt and Palmer would acquire exclusive use of the Boeing 727 for a period of time. Hunt and Palmer would then make the aircraft available for its clients. I got as far as drafting a proposed Exclusive Aircraft Use Agreement in respect of the Sheikh's Boeing 727 with proposed aircraft charterers, Hunt and Palmer. The draft agreement naturally enough named Jet Connections as operator. This agreement was never concluded but the Sheikh and Mr Al Nouti would have been fully informed about the negotiations and the proposal that Jet Connections should enter into the leasing agreement as operator
."
Leaving aside for the moment the question of any work arranged through Jet Connections that might have otherwise been handled by the 3rd Defendant, the question of the knowledge of the existence of Jet Connections and its operation on the part of the Sheikh and/or other representatives of the FAL Group needs to be addressed. The Sheikh's evidence is that he personally only became aware of the existence of Jet Connections when he met with Mr Deir and Mr Al Nouti on 19 August 2008 for the final arrangements for Mr Deir's departure to be discussed. For the reasons given below, it is very surprising that that should be so. However, as in all matters of this nature, the question is whether the knowledge should be imputed to him because of the knowledge of others employed within his corporate organisation.
According to Mr Deir, the reason that Jet Connections was incorporated was to facilitate the chartering of the private aircraft of the Sheikh including the Boeing 727. That, of course, was something he was proposing to undertake on the Sheikh's behalf when in the UK as agreed in December 2003 (see paragraph 22 above). He referred in the extract from his witness statement set out above to the Exclusive Aircraft Use Agreement concerning that aircraft that was drafted. The agreement, which named Jet Connections Ltd as the "operator", provided that Hunt and Palmer were to have exclusive use of the Boeing 727 for a minimum period of one year. Although undated, it is clear that it was drafted for use in 2004. That, of course, is a document that would be consistent with what had been planned and there could, so far as one can judge, be nothing sinister in Mr Deir setting up a corporate vehicle to facilitate this work: that is probably what the Sheikh would have expected.
Irrespective of anything that the Sheikh may have been told directly about Jet Connections, Mr Hill-Smith contends that the Sheikh would have been fully informed about this arrangement, particularly in the light of its one-year proposed duration and draws attention to the fact that this draft Agreement formed part of the disclosure provided by the Defendants. This shows, he submits, that Jet Connections was known about early on irrespective of anything said expressly about it to the Sheikh by Mr Deir.
Mr Deirsaid Jet Connections could not in fact be used for the purpose of operating the Sheikh's aircraft after he discovered that it did not have an Air Operator's Certificate permitting commercial operation of the aircraft in the UK. I do not think that there is any evidence about when that discovery was made, but equally, as I understand it, the substance of what Mr Deir says in this regard is not challenged.
There is no evidence that any significant work was actually carried out by or in the name of Jet Connections until certain events in 2005 to which I will turn shortly. The bank statements for Jet Connections reveal no activity during 2004 other than receipt of $11,368.29 from Sheikh Al Hamrani on 15 September which appears to relate, not to chartering Sheikh Al Hamrani's plane, but to planning a private flight on his behalf from Farnborough to Paris on 21 September 2004.
However, there is evidence, in the form of a letter from Mr Deir to Sheikh Al Hamrani dated 22 April 2004, that Mr Deir had in mind using Jet Connections for purposes other than simply managing the chartering of Sheikh Fahad's aircraft. In the letter Mr Deir referred to a recent lunch appointment with Sheikh Al Hamrani (who was, of course, at that time a customer of SAMCO) at which he had plainly spoken of having "established and registered [an] Aviation Company here in the UK". He said that he was "in the process of finalising the office set up and [that he had] hired the required personnel." He said that he anticipated "by the end of this month [being] ready and running." There is no doubt that the subject of the conversation and the subject of the letter was the possibility of Jet Connections arranging and conducting the day-to-day management of Sheikh Al Hamrani's Boeing 737 aircraft. At that time the aircraft was being managed by SAMCO. There is a further letter from Mr Deir to Sheikh Al Hamrani on 20 June 2004 concerning the costings of the annual inspection for the aircraft, but matters do not seem to have proceeded any further thereafter until the events to which I am about to turn. It is, however, fair to say that this exchange of communications between Mr Deir and Sheikh Al Hamrani does raise questions about what Mr Deir had in mind so far as Jet Connections was concerned and what its relationship with SAMCO would be.
Before turning to the material events in 2005, one background fact it is necessary to bear in mind is that from the beginning of 2004 Mr Ahmed Abubaker had replaced Mr Deir as General Manager of SAMCO. SAMCO continued to be a joint venture between the Sheikh and Sheikh Khaled El Seif. Both the Sheikh and Mr Al Nouti acknowledged in their evidence that Mr Abubaker had the responsibility of informing them of material matters concerning the business of SAMCO.
By March 2005 Sheikh Al Hamrani was in dispute with SAMCO about the payment of fees. Indeed it appears from one document disclosed that the dispute had been going on for some time, confirming what Mr Deir said about it when questioned. Mr Abubaker had apparently written to Sheikh Al Hamrani's representative on 30 January 2005 in what Sheikh Al Hamrani regarded as "threatening" terms and, following a further letter from Mr Abubaker on 6 March 2005, a letter on behalf of Sheikh Al Hamrani was sent terminating his dealings with SAMCO. In a fax dated 15 March Mr Abubaker told Mr Al Nouti and a representative of Sheikh Khaled El Seif that Sheikh Al Hamrani had terminated the contract. Mr Abubaker did not say to them at that stage that Jet Connections was taking over the contract.
Within a short while of the termination of the contract, arrangements were being made for the transfer of the business concerning the aircraft to Jet Connections. There are e-mails from Mr Abubaker on 13 and 19 March speaking of the arrangements to be made. On 29 March Mr Abubaker e-mailed Mr Deir with a list of the agents throughout the world that had been notified by SAMCO of the changed arrangements. All these e-mails are from a SAMCO e-mail address. The e-mail of 29 March from Mr Abubaker was left behind at Lydd Airport when Mr Deir departed. At the beginning of May Mr Abubaker signed a document on behalf of SAMCO which facilitated the assignment or transfer of the appropriate Air Navigation contract and upgrade to Jet Connections. Whilst none of the e-mails are copied to anyone in the FAL Group, there is no obvious ruse being adopted to conceal what is happening and one would have thought that all matters surrounding an event such as this would be common knowledge. The Sheikh said he was unaware of it.
The next event of some significance in this context arises from discussions about a possible joint venture between GAMA and Jet Connections for providing medical evacuation services to the Saudi Ministry of Defence in the event of a military incident. The documentary material in the papers before the court is somewhat scant, but there is a fax on LAA fax paper dated 16 August 2005 from Mr Deir to Mr. Antoine Samara, the GAMA financial controller, in which he said:
"Please find attached a copy of the Certificate of Incorporation and the Memorandum of Association for Jet Connections which is a Company owned by me personally.
Please note that I do not have any objections for Jet Connections becoming part of the Joint Venture as London Ashford Airport (LAA) does not have the ability to manage and operate aircraft."
When the Sheikh gave evidence he confirmed that Mr Samara reported to him and to Sheikh Khaled El Seif. The Sheikh said that Mr Samara would have told him about the proposed arrangement if they had been "very close to being successful" in the bidding, but that did not happen. On that basis, the Sheikh said he was unaware of the possibility of Jet Connections being involved in this matter.
I do find it impossible to accept that two separate people employed effectively by the Sheikh should fail to mention to him the involvement or potential involvement of Jet Connections in two separate and unrelated matters. I have already made an observation about the ending of the contract between SAMCO and Sheikh Al Hamrani. So far as the proposed joint venture is concerned, on the limited evidence available, it would seem to have been a major venture in which, I am sure, the Sheikh would have wished to have played a part if possible. I simply cannot accept that he was not kept in the picture about the negotiations as they unfolded even if he did not play an active part in them.
Irrespective of whether the Sheikh knew personally about Jet Connections at this time (and I consider it likely that he did) there are two observations to be made: first, at this stage two relatively senior people employed by him did know about Jet Connections; second, Mr Deir did not seem troubled at the emergence of documentation, whether from him or from anyone else, that referred openly to Jet Connections and his interest in the company. Whatever might now be said, it suggests that, so far as he was concerned, he perceived that what he was doing was "above board".
Mr Mutlaq (who, of course, worked at Lydd Airport on a daily basis from mid-2003 until mid-2007) said this in his witness statement:
"I am now aware that Mr Deir set up Jet Connections in March 2004. At the time I did not know anything about this Company but I knew that he was doing some business for himself. I didn't have any proof of this at the time so I could not raise this with [Mr Al Nouti]."
He added this:
"I was aware that the Claimant was involved in the
management of aircraft and chartering for Sheikh Al Hamrani because on one occasion Mr Deir and I met with Sheikh Al Hamrani at Luton Airport. Again, I had my suspicion that such work was being undertaken without the prior knowledge of Sheikh Fahad or [Mr Al Nouti]."
Whilst I can readily understand that, if he perceived a conflict between Mr Deir's position and that of the Sheikh, Mr Mutlaq would have been in a difficult position. However, he had been a former colleague of Mr Al Nouti (who had recruited him) and it is difficult to believe that, had he felt uneasy about anything at any time, he could not have raised the matter discreetly with him. However, there is another aspect to this: Mr Deir knew about the close association that there had been between Mr Mutlaq and Mr Al Nouti and yet was prepared to continue such business as he did through Jet Connections sufficiently openly for Mr Mutlaq to know about it. Again, this lends credence to the view that, from his perspective, Mr Deir believed that what he was doing did not represent any kind of conflict of interest of the kind now sought to be put against him.
Although Mr Deir has said that he told the Sheikh about Jet Connections, he was unspecific about when that was. I am unable to find, on the balance of probabilities, that he did say anything specific to the Sheikh about this company. However, I do consider it more likely than not that the Sheikh did get to know about the existence of Jet Connections at a relatively early stage and was simply unconcerned about it. From his point of view, Mr Deir was in the UK pursuing the Lydd Airport venture upon which the Sheikh placed an understandably high priority. Since there was no complaint made (and, I emphasise, there is still no complaint made) about what Mr Deir was doing (or did) in that regard or about the essential progress he was making (despite what the Sheikh will have perceived to have been unjustified delays in the planning process), I think the most likely scenario is that the Sheikh was not concerned about any other business venture that Mr Deir engaged in provided it did not interfere with that essential objective. As the evidence has unfolded, the actual number of transactions carried on through Jet Connections during the relevant period was small and there is no evidence that they interfered in any way with Mr Deir's principal activities. I do not believe that the Sheikh would have been at all interested in seeking to share in the profits of the few transactions that were carried out during this period under the Jet Connections' umbrella.
Subject to one matter to which I will refer shortly, I do not consider that the claim for an account of profits arising from the work put through Jet Connections has been made out. Before I turn to that one specific matter, there is one broad matter I should deal with. Mr Lewis was, in my view, justified in saying that some of the answers given by Mr Deir to the requests for further information concerning Jet Connections in the preliminary stages of this litigation where neither full nor, in some cases, frank. I do not, for example, understand how he could have answered that the company did not conduct any business until September 2008. Now that the relevant documents have been disclosed, as I have already observed, not a great deal of business was put through Jet Connections and the profits, if any, generated were not great. But to deny unequivocally at the outset that any business was conducted cannot be the result of an oversight. Not unnaturally, this has made me pause about this particular aspect of the case. However, the strength of the evidence that (i) whatever Mr Deir was doing was being done openly and (ii) that documents concerning Jet Connections were being sent to FAL Group representatives, at least in the early stages, has satisfied me that, at the time, he did not think he was doing anything of which the Sheikh would disapprove. Nonetheless, when the relationship broke down and Mr Deir sensed (as I am sure he did) that litigation was likely to ensue, he became concerned that he had not said specifically to the Sheikh at any stage precisely what Jet Connections involved and that this would be used against him in some way. I think he was less than frank about what had gone on because of that and possibly also because most of the dealings were with Sheikh Al Hamrani and his relatives with whom, as I understand it, the Sheikh had fallen out. I do not think that Mr Deir's lack of frankness in this regard does him any credit, but it has not displaced the weight of the rest of the evidence to which I have already referred suggesting that, in truth, the Sheikh knew all that he needed to know about Jet Connections and was not the least concerned. In this tangled web, where separating truth from fiction is not easy, I consider that to be the most likely explanation.
The one matter that, in my judgment, requires consideration is the use to which the facilities of LAA were put for the purposes of Jet Connections. Whilst, for the reasons I have given, I do not think that the Sheikh can complain about the actual business conducted through Jet Connections, I do not think he can be said to have condoned or acquiesced in the use of LAA facilities (including staff) to further the aims of that company. Mr Deir accepted that, to a relatively limited extent, he used the office facilities when business was conducted through Jet Connections and Ms Lobb did some secretarial work for him in this regard. When the matter was put to him, he said that it was a fair point. As I have said, the extent of the business was not great during the 4½ years from March 2004 until September 2008, but I think that some balancing figure is justified to reflect that use. Since, in my view, this disputation should be brought to a close as soon as possible, I do not propose to adjourn that issue for consideration by another tribunal. I propose to paint with a broad brush and will permit £18,000 (in other words, £4000 per annum for 4½ years) to be set off against any sum payable by the Sheikh to Mr Deir on the claim. If the parties wish to contest that, they will have to persuade me that it is a proportionate exercise to send the matter to a Master for further consideration.
Unauthorised expenditure and claims?
I must now turn to what is, in effect, a claim for reimbursement by LAA for payments made to Mr Deir for various matters including expenses, credit card payments and other items said to have been claimed wrongly and/or in breach of his contractual entitlement.
I will deal with each aspect separately, but I would begin with a general observation. When Mr Deir came to the UK, apart from the commitment to the additional director's fees to which I have previously referred, there had been no concluded agreement about his remuneration package save that commitment when appointment to directorships occurred. For the first two months, it appears, he worked for no pay and with no clear understanding of what he would be paid on a regular basis. Whilst there was tacit acceptance of the position after the Sheikh's letter of 1 March, nothing ever became committed to a final written contract as contemplated in the Sheikh's letter. Essentially, practices became established over a period of time. The 2005 Audit report (April 2005) was essentially complimentary about what had been achieved since the beginning of 2004. The General Comment was as follows:
"The new management who took over the helm in January 2004 have done a significant transformation in the image of the airport [through] massive expansion programme, securing political backup, hiring qualified and professional staff, strengthening airports presence in the market, and implementing internal controls in finance, administration and operation.
The objective of this internal audit report is to constructively highlight the weaknesses of the existing internal control system for correction and rectification."
I think it is quite plain that it was not until the audit conducted in July 2007 (after the beginnings of the breakdown in the relationship between the Sheikh and Mr Deir and just before his first resignation letter: see paragraph 85) that there was any true or close focus on what those practices were. In the broadest sense, if by then practices had been established over the previous three years then it will, by and large, be too late for the payer to complain that the payee has received sums to which, arguably, he or she was not entitled. The law of England and Wales is that a contract can be implied from conduct and if a course of dealing yields a pattern that appears objectively to have been accepted by the parties, then payments made pursuant to it are lawful because they are treated as having been agreed. Alternatively, acquiescence may be held to have occurred. That broad consideration may well apply to some of the items in dispute in this case.
Another broad matter is this: someone appointed to the role of managing director of a UK company does have some discretion (and indeed a duty) to make arrangements for the daily conduct of the company subject, of course, to the ultimate approval of the Board of Directors. The context here, however, is that Mr Deir was effectively sent to the UK to get on with achieving the Sheikh's ultimate objective. Whilst I would not have operated as a carte blanche for wholly unjustified claims for expenditure, it is likely that the ultimate objective would have overshadowed discussions about the minutiae of business expenditure. In his witness statement Mr Deir said this:
"For the first four and a half years of my employment, the Sheikh gave me a free hand to run the company as I felt appropriate. My instructions were to do whatever was required to move the business forward as the whole development was based on obtaining planning permission for the runway extension and the building of a new terminal. There were never any official company meetings (including annual general meetings). From time to time, I gave briefings and updates on the progress to the Sheikh on a number of my visits to Riyadh and on two or three occasions when he visited the airport. Most of these meetings would be one to one."
Whilst I think that Mr Deir may have meant "the first three and a half years", the sense I get from all the evidence is that what he has said was accurate. Indeed Mr Al Nouti accepted this as a general proposition when giving his evidence because he acknowledged that it was more important to focus on getting planning permission than troubling too much with issues concerning expenses. Matters do, therefore, have to be assessed against that broad, but rather important, background.
I think the point made by Mr Hill-Smith, namely, that the setup of LAA was "unconventional" has some force in it and rather follows from the general philosophy referred to in the preceding paragraph. There were no proper board meetings and few, if any, of the directors seem to have had any perception of their duties under English law. Although Mr Mutlaq was employed to monitor and control the expenditure of the company (and he would have had Mr Al Nouti's confidence), he seemed not to know what policies he should have applied. That cannot be blamed solely on Mr Deir: Mr Mutlaq was at the airport from May 2003.
Much has been made of the failure of Mr Deir to ensure that FAL Holdings policies were not being applied. However, it is a fair point in his favour that when a new set of FAL policies was distributed on 21 January 2004, less than three weeks after he arrived to take control at Lydd Airport, it was not sent to LAA.
As I have previously indicated, an audit did take place in April 2005. By then Mr Mutlaq had been in harness for approximately two years. Some recommendations for strengthening the internal financial structures were made and there is no doubt that the response in respect, for example, of Business Travel Policies and Procedures and business trips was that the intention henceforth at LAA was to follow what was called "FAL Policy". It was, however, when being questioned about why that was not followed up that Mr Al Nouti said what I recorded in paragraph 158 above.
Against that background, it is clear that, whatever those who conducted the audit in 2005 might have wished, those at the head of the organisation were less concerned about the strict controls at that stage than they have subsequently said that they were. Indeed even when the controversial 2007 audit was conducted, the report (which Mr Deir asked by e-mail of 4 October 2007 to see) was withheld from him (apparently on the Sheikh's instructions) until April 2008 because, it was said, there was a possibility that the airport would be sold. I have said that the audit was "controversial". Mr Deir wrote a very strong letter to the Sheikh on 17 July 2007 (following a telephone conversation between them the previous day) complaining about the conduct of the audit, apparently conducted personally by Mr Al Nouti.
With those general observations made, I will turn to some of the more detailed issues.
Per diem payments
In the period from January 2005 until July 2007 Mr Deir claimed per diem expenditure in other words, a daily allowance whilst working away from the airport on company business. The total sum claimed and paid was £32,000. Repayment of this sum is sought.
There appears to be some dispute about whether per diem payments were permitted at all within the FAL Group. The Sheikh said that they were permitted throughout the whole group, but subject to what he described as the FAL Holdings policy. Mr Al Nouti said that there was no per diem scheme within the group. The policy documents indicate that food, accommodation and travel expenses would be reimbursed up to a maximum daily limit depending on the status of the person within the group. It is said in the policy document that the specified limits "are not to be considered as a 'per diem' allowance." Mr Deir says that, so far as he was concerned, when he worked for SAMCO he was paid a per diem rate of US$96 and did not think it was contrary to FAL policy. Given that background, it is not that difficult to see why the boundaries between what was mere reimbursement of expenses up to a daily limit and a true per diem rate were somewhat blurred. At all events, after his arrival at LAA Mr Deir claims to have issued a policy on 27 July 2004, drafted or substantially drafted by the HR department, which appears to represent an amalgam of both aspects. He described it in this way in his witness statement:
"On 27 July 2004, I issued a Memorandum on behalf of LAA whereby employees were to receive a per diem payment when out of the office. Under the terms of this Memorandum, very senior personnel including myself were to receive a daily allowance. I was to receive £200 a day in addition to incurred expenses whereas Mr Mutlaq the Finance Manager was to receive £150 a day. The Marketing Director was entitled to receive £150 a day. This was a standard policy adopted by many companies; the same policy had been in place at Samco from the outset. I received US $96 per diem plus expenses when I was at Samco. To my knowledge, all aviation companies in the Middle East use a per diem policy."
Mr Lewis made clear when cross-examining Mr Deir that it was his case that this document was created some three years later in order to justify the claims that had been made. Mr Deir resolutely denied any such suggestion and said, when questioned, that the reason no claims were made under it prior to the beginning of 2005 was that it was necessary to check with the company's accountant about the taxation implications of any payments made pursuant to it.
As I have said before, obtaining a precise picture of the way everything was handled within LAA during the relevant period is not easy and, in some respects, it is made less easy when almost every single aspect of what Mr Deir is said to have done from the moment he arrived there is characterised on behalf of the Sheikh as fraudulent, dishonest, underhand or whatever other pejorative adjective can be found - and every aspect of his evidence and that of any witness he called where it differs from the perception of the Sheikh's side as being a "lie", "incredible", "ludicrous", "concocted" and so on. Since he was, throughout the whole of his time there, endeavouring to further the primary objective of the Sheikh and, on any view, had moved things forward at the airport significantly and in a very positive way from that perspective, this whole case is one that is difficult to understand. I have no doubt that he will have had an eye to his own self-interest from time to time: it would be odd if he did not. However, that is a rather different matter from the picture sought to be painted.
For my part, looking at the document itself, there is nothing about it that suggests that it was not made on the date it bears and indeed if, as appears to be the case, it was produced electronically, there is an electronic date stamp at the foot of it indicating the date 27 July 2004. If one considers the position at Lydd Airport at about this time, Mr Deir would have been there for some months, various employees were being engaged and one can see the need for internal policies to be put in place. It is, of course, very easy to say that this particular policy was put in place largely to benefit Mr Deir. Indeed that may have been so. But it is a very large jump from that to say that, in order to cover up some £32,000 worth of unjustified claims (which, as I shall indicate, were signed off by Mr Mutlaq) three years later, a document of this nature was fraudulently created. I am not prepared so to hold on the evidence and I am, on balance, prepared to accept that what Mr Deir has said about the creation of the policy and its subsequent implementation is correct.
Furthermore, a somewhat belated attempt was made to suggest that the claims that Mr Deir was making in this regard were sought to be disguised in order to deceive the auditors. Despite the intense preparations that preceded the hearing before me, and the nature of the allegations to be made having been foreshadowed, no such proposition had been put forward positively before and it was not something specifically put to Mr Deir when he gave his evidence. Against that background, I am not prepared to consider making any such finding and indeed, whether Mr Mutlaq was right or wrong in approving these claims, they do appear to have been made openly and without any evident attempt at concealment.
Mr Deir described the procedure adopted as follows:
"There was no secret about these claims for per diem payment as specific expense forms were completed and sent to the accounts department relating to these. My PA completed out of office expense forms for me by checking my diary. I would then sign these off and she would then send them on to Mr Mutlaq at Accounts and retain copies
."
Indeed it is correct that Mr Mutlaq countersigned and approved these claims. Indeed, on a limited basis, he made some claims for per diem payments himself.
The bottom line seems to me to be simple: Mr Mutlaq was employed to oversee expense claims at Lydd Airport and, whilst I accept that his position might arguably have been uncomfortable if he had been concerned about any claims made by Mr Deir (his day-to-day "boss"), he would have had ready access to Mr Al Nouti on a discrete basis if he felt there were matters he ought to clarify about what was or what was not permissible (see paragraph 149 above). He did not do so and the auditors raised no point about these payments and, whether strictly in accordance with FAL Group policies or not, it does seem to me to be too late for complaint now to be made.
Family travel to and from Jordan
Mr Hill-Smith has invited me to adopt the same approach as that concerning the per diem payments in relation to claims made for family travel each year by Mr Deir. He submitted that the Sheikh had conceded that when Mr Deir was employed by SAMCO, SAMCO had paid for the cost of a flight to Jordan and the UK each year for Mr Deir and his family. Mr Deir continued to apply for and receive this benefit when employed by LAA. He took and claimed for a flight each year from 2004 to 2008 at a total cost of £15,529.20. Mr Mutlaq also conceded that Mr Deir was perfectly open about this.
Whilst I can see the attraction of Mr Hill-Smith's submission, I do not think I can accept it in this instance. Mr Lewis says that Mr Deir was not contractually entitled to family travel and that the Sheikh had expressly removed the suggested family travel allowance feature of the remuneration package put forward by Mr Deir in his fax to the Sheikh of 20 January 2004 (see paragraph 47 above).
Although Mr Deir never regarded himself subjectively as having accepted the Sheikh's contractual package put forward in response to his, the fact is that he was effectively treated as having agreed to it and, objectively speaking, where something had been specifically proposed, but then rejected and thus expressly excluded from the eventual contract, it seems to me that the contractual position has to be that there was no provision for family travel in the way that there had been previously. It would, in my view, be difficult to see how an agreement about such an issue could then be implied from a course of subsequent dealing when it had been expressly excluded at the outset. It is different from a situation such as that, for example, obtaining in relation to the "per diem" payments where no discussion at all had occurred in relation to them at the outset.
I do not think that there was anything fraudulent in Mr Deir making the claims as he had done before, but a strict analysis of his contractual entitlement seems to me to lead to the conclusion that he should not have received the sums he claimed in this regard.
The Sheikh's exclusion of this aspect of the previous remuneration package (if indeed it was he who formulated the proposed package) could be seen as somewhat mean. However, as I understand it, in the initial years of his employment by SAMCO, Mr Deir's close family lived in the UK and travelled with him from time to time to Jordan which is where Mr Deir's wider family lived. It might have been thought that this was a matter for him and his family now rather than some kind of "perk" under his contract of employment. Furthermore, the commitment to director's fees could be seen as partly repairing the position.
At all events, this aspect of the counterclaim is, in my judgment, made out. Credit for the appropriate sum will have to be given against the amount of Mr Deir's claim.
Other air travel
Other issues were raised about air travel. It was accepted by Mr Deir that he was only entitled to travel business class, not first-class. He did travel first-class on one occasion when, on his evidence, a special offer from the airline was available at no extra cost. No evidence has been advanced to show that he was wrong about that or that there was, in the circumstances, any differential between the fare he paid and claimed from LAA and the fare otherwise payable. To that extent, I reject this allegation as unproven from the point of view of quantum.
Another issue surrounds the attendance of Mr Deir, Ms Lobb and another LAA employee, Ms Walkley, in October 2005 at the National Business Aviation Association convention in Orlando and, in relation to Mr Deir and Ms Lobb, a one or two night stay in New York between 23 and 25 May 2006 - although at one stage the suggestion is that this was in effect part of the trip to Orlando. I am not entirely sure what the final allegation was in relation to these matters. It was at one stage in issue about whether Ms Lobb should have been taken at all on the trip to Orlando, but it seems to have been accepted that it was within the Managing Director's discretion to decide whether to take his PA on an important business trip to the convention. If that was not accepted, I would so hold. It is still not entirely clear to me whether the allegation is that the New York stay represented nothing more than a "holiday" and, accordingly, there should be reimbursement of the cost of those two nights. It is also said that there should be reimbursement of the difference between the business class cost of the outward travel for Ms Lobb and Ms Walkley to Orlando since they should have only travelled economy or premium economy class.
I am bound to say that the cost of litigating this point may well have exceeded the differential in the relevant airfares. However, since the issue has been raised, I must deal with it.
It is now accepted that Ms Lobb travelled business class to Orlando (it is said because there was no economy or premium economy seats on the flight out). The same reason is given for Ms Walkley even though she took a different route out. This is, of course, possible, but it seems to me unlikely. I suspect that Mr Deir was being more generous than he ought to have been. I have no real evidential basis upon which to work, but I will order reimbursement of a total of £2000 in relation to the airfares of Ms Lobb and Ms Walkley.
However, I do not accept that the stay in New York was a holiday or a frivolity, as seems to have been suggested. Ms Lobb recalled a business meeting at the airport and I am prepared to accept that that was so.
I was troubled one stage during the course of the evidence that this issue, along with another occasion when it was suggested that Mr Deir purchased a gift for a female he was with, was simply raised to embarrass Mr Deir. I was assured that this was not so and will, of course, accept the assurance. However, it seems to me that there were more legitimate areas for the raising of questions than this one.
Expenditure above the daily limit
The FAL Group Policy daily limit of expenditure on expenses when travelling was US$500 per day. If it applied to Mr Deir then an excess of £4,758.74 has been found to be attributable to Mr Deir and that sum is reclaimed. As Mr Lewis accepts, the only issue is whether or not the FAL Policy applied.
It seems to me that Mr Hill-Smith is justified in saying that it was only when the 2007 audit report (strictly speaking, in draft form) was supplied to Mr Deir in April 2008 that any mention was made of that particular policy. It was one that was implemented by Mr Mutlaq during the period he was in charge of monitoring expenditure and, accordingly, it seems to me to be far too late to seek recovery of these sums now. In any event, given the way in which the issue has emerged, it has not been established to my satisfaction that the policy did indeed apply to Mr Deir whilst employed as managing director of LAA.
I reject this aspect of the Counterclaim.
Credit card claims
Pages and pages of credit card slips and statements have been copied for the purposes of the case. If I understand the Defendants' position correctly, the issues raised relate to what are alleged to be (a) non-company related payments, (b) payments with no supporting invoices or other documents and (c) payments which are said to represent lavish or excessive expenditure or tipping. The total sought to be reclaimed is approximately £41,205.
Some of the items that appear under this part of the counterclaim relate to the family travel expenditure which I have dealt with in paragraphs 173-178 above and some to the Orlando/New York trips which I dealt with in paragraphs 179-184 above. There cannot be double recovery here and, accordingly, the full value of those items should be deducted from the above sum before the application of the approach to which I will refer below.
I do not intend to deal with each and every item. Some of the items sought to be challenged are items that Mr Deir said constituted gifts to councillors. He says that it is part of the culture from which he comes that this kind of approach is adopted. In the UK it is, not unnaturally, a sensitive matter and if any gift (certainly one over a certain value) is accepted by someone in a position of influence, it is customary for it to be disclosed publicly. The position is taken on behalf of the Sheikh that any such expenditure would be wholly wrong and contrary to the interests of the company. I am bound to say that I think that the position taken is a little too spotless in its connotation to be accepted. I am quite sure that, if the purchase of a gift was thought by Mr Deir to help in furthering the interests of the company, the Sheikh and those who were his advisers would not have objected. I simply say this so that it is understood that I have not disallowed any such item simply because of this objection. However, there were one or two matters where I found the account concerning such gifts difficult to accept (for example, over the gym membership) and I have, accordingly, said to myself that such items have not been shown by Mr Deir to be legitimate expenditure.
I discouraged detailed cross-examination about these matters because it seemed to me that the time spent in investigating them would be disproportionate to the costs at stake. I am proposing again to paint with a very broad brush. I think there are some items that, even if "business orientated", contained a personal element that ought not properly to be regarded as company expenditure. I propose, therefore, that 25% of the amount claimed on the credit cards as set out in Schedule 1, Parts A-C, less the full value of the airfares that have been dealt with elsewhere, be treated as having this personal element and should be repaid by Mr Deir to the Defendants. As I have said before, if either party wishes to suggest that there is unfairness in this approach, I will need persuading that any further time and expenditure is justified in relation to it.
This element of the Counterclaim succeeds on that limited basis.
Beechcraft Bonanza aircraft
The Beechcraft Bonanza aircraft indisputably belonged to Mr Deir. The short issue is whether it was justifiable for LAA to charge him (or Jet Connections) hangarage and landing fees as it sought to do after Mr Deir left Lydd Airport.
Mr Mutlaq agreed that the airport incurred no extra cost in having the aircraft parked there when it was and he accepted that another person who parked his aircraft was not charged hangarage. He appeared to concede that he should not have charged the amounts claimed and, accordingly, there does not seem to be any basis upon which this aspect of the counterclaim could succeed.
Mr Hill-Smith has drawn attention to the fact that, notwithstanding that concession, a sum of £1,652.72 was paid by Jet Connections in June 2008 and that credit should be given for that sum. It seems to me that that contention is justified and, accordingly, an appropriate adjustment must be made.
It follows that the Counterclaim in this regard fails and the credit in favour of Jet Connections to which I have referred should be given.
1999 BMW
The Defendants suggest that £5,377 should be repaid by Mr Deir because that represents the excess valuation of a 1999 BMW that he owned being transferred to LAA for £15,000. It is suggested that he over-valued the car.
The short point is that there is no evidence that it was an over-valuation and, accordingly, this aspect of the counterclaim cannot succeed.
Agreed issues
Mr Deir agrees that he must give credit of £22,000 for a 2005 BMW (with a personalised number plate) which he continues to use and which was provided to him by the company.
It is accepted that the sum of £3,898.43, representing work carried out by Phoenix Aero-Engineering Ltd to the Beechcraft Bonanza Aircraft, needs to be met. That claim is, therefore, admitted.
Mr Deir accepts that he has retained a laptop computer that, strictly speaking, belongs to LAA. He agrees that some credit should be given in relation to that. I trust that agreement can be reached on this.
The Piper Warrior aircraft
I must turn to the vexed and strange tale of the Piper Warrior PA 28 aircraft (Registration number G-BXVU) which was manufactured in 1977. Until shortly before October 2004 it had been under the effective control of Mr Jonathan Gordon through one of his companies. From May 1998 until September 2000 it was owned by Atlantic Bridge Aviation Ltd when it was transferred to Gordon Air Limited. It remained with Gordon Air Limited until February 2002 when it was transferred back to Atlantic Bridge Aviation Ltd until November 2002. It was then transferred to LyddAir Limited which owned it until October 2004.
There is no doubt that the Piper aircraft was disposed of shortly before 8 October 2004. On that day it was registered by the Civil Aviation Authority in the name of LAA. The registered owner of the aircraft, pursuant to whatever transaction had taken place, was, therefore, LAA. That registration does not, as I understand it, necessarily reflect the actual beneficial ownership of the aircraft. It is, I believe, common ground in the case that an aircraft cannot be registered with the Civil Aviation Authority unless the owner is a UK or Commonwealth citizen or, if an aircraft is owned by a company, the company must be controlled UK or Commonwealth citizens.
Mr Deir says that the intention behind the transaction that took place shortly before 8 October 2004 was that he was to become the beneficial owner of the aircraft and that the only reason that the aircraft was registered in the name of LAA at that time was because he was not a British citizen. He did become a British citizen in May 2007 and in January 2008 the aircraft became registered in the name of his company, Jet Connections Ltd.
In his witness statement he referred to the background to its acquisition in this way:
"I joined LAA on the 1 January 2004 and I assisted with the day to day running of Lydd Air along with Jonathan Gordon and I put the extra time and effort to get Lydd Air on its feet along with my duties for the airport, (Michael Winskell may have had theoretical control over the company Lydd Air but in practice he had no input after I joined whatsoever.)
I was a qualified pilot and I had obtained a private pilot's licence a few years before joining LAA. Jonathan Gordon encouraged me to start flying the Piper and to use it to commute between Lydd and Oxford, a trip I used to do at the end of the week as my family home was near Oxford. Jonathan Gordon started using another aircraft he owned, namely a Beech Baron with twin engines. The cost of operating his aircraft was paid by LAA and he was never charged for landing or parking fees, during his time as CEO of LAA (I know that because it was an issue which was discussed with the Sheikh at the time).
In return for my hard work for the first 9 months, Jonathan Gordon wanted me to have the Piper Aircraft as recompense for the token price of £1. I agreed and Jonathan Gordon executed the appropriate Bill of Sale on behalf of Lydd Air dated 6 September 2004. At this time the Piper Warrior aircraft was 27 years old, DOM 1977. It was not worth even £5000 at that time since it required a replacement engine and propellers and thorough overhaul to the airframe."
I will return to aspects of this account later.
Leaving aside all questions of ownership for the moment, a reference to the log that records the use of the plane shows that it was piloted almost exclusively by Mr Deir from about August 2005 onwards. It was not put into service immediately after it was acquired apparently because it needed a substantial overhaul including the installation of a new engine. It appears that LAA paid for this overhaul and the new parts incorporated in the aircraft. There is ample evidence that Mr Deir's use of the aircraft was well known to everyone at Lydd Airport. He used it for showing visitors to the airport a view of the airport from the air and, he says, on other company business for the purpose of attending meetings. He used it from time to time to commute to and from his home in Oxfordshire.
Before I deal with such documentary evidence as there is concerning the aircraft, I would merely record that it is LAA's case, supported by evidence from Mr Jonathan Gordon, that the intention of the sale was that the beneficial ownership of the aircraft should go to LAA, not Mr Deir personally, as part of the overall transaction completed in early 2005 by virtue of which the Sheikh acquired a yet further interest in the airport from Mr Gordon leading to a 93% shareholding overall. In his witness statement of 27 July 2010, Mr Gordon said this:
"
I am quite clear that ownership of the plane transferred in October 2004 from Lydd Air Ltd directly to London Ashford Airport Ltd, and not to the Claimant personally. The reason that I say this is that the Piper cropped up in negotiations between Sheikh Fahad and I. [Mr Deir] should be aware of this because he negotiated exclusively with me on the Sheikh's behalf when I was contemplating selling my shares. Mr Deir, on behalf of Sheikh Fahad indicated that he wanted the airport to take the aircraft as part of the overall deal to use for its benefit. I was not willing to give up the Piper for nil consideration. This, therefore, was initially a stumbling block but, ultimately, a value of £10,000 was attributed to the Piper and factored into the ultimate sum that Sheikh Fahad paid me for my shares."
So far as the documentary evidence is concerned, there is no doubt that the aircraft was registered as I have described above on 8 October 2004. It also seems clear (and to the extent that it may be in dispute, on balance, I so find) that on 6 September 2004 Mr Gordon sent or handed over all the registration documents relating to the aircraft to Mr Deir. A post-it note, which contains the following in Mr Gordon's handwriting, was found by Mr Deir shortly before the trial (and it has not been suggested to have been a forgery as so many documents have):
"Zak/ For info.
Posted to CAA today 6/9/04.
Jonathan."
Mr Gordon, whilst accepting that the above was in his writing, was somewhat ambivalent about accepting that this post-it note related to the Piper aircraft. He suggested that he was engaged in a fair amount of correspondence with the Civil Aviation Authority at the time and consequently was unable to say whether the post-it note was referring to that particular aircraft. He also said that the Civil Aviation Authority normally responds very quickly to a request for registration and he was surprised that it should have taken just over a month for the change in registration to be effected. However, he did not categorically deny that the document related to the Piper aircraft, conceded that it would have been him who would have sent the registration documents for the Piper to the CAA and there is no evidence from him or from anyone else that indicates what else the post-it note could be referring to. There is other writing on the post-it note which Mr Deir says is that of his former PA which indicates the subject matter was the Piper Warrior aircraft.
Mr Deir's evidence is that he asked Mr Gordon to register the aircraft in the name of LAA because of his lack of British citizenship at the time.
There is no other immediately contemporaneous evidence relating to this transaction. A Bill of Sale was produced (in controversial circumstances to which I will return later), but there is no contemporaneous documentary evidence to show how the title to the aircraft changed. There are two other documentary features of some relevance: first, the aircraft was not listed in the fixed asset register of LAA for the year to 31 December 2004 which, if it was a company asset, it should have been; second, the Share Sale Agreement by virtue of which South East Airports Ltd (of which Mr Gordon was a shareholder) sold 1,923,076 shares in LAA to Lydd Holdings Ltd for the sum of £1.69 million was dated 17 February 2005, thus several months after the new ownership of the aircraft was registered.
The Share Sale Agreement, which was not between LyddAir Limited (the owner of the aircraft in September 2004 before the change of ownership) and LAA (its registered owner after the change of ownership), makes no reference at all to the aircraft being part of the consideration for the deal.
When giving his oral evidence Mr Gordon said, for the first time, that the agreed a figure of £10,000 as the value of the aircraft was achieved by reducing the sum of £1.7 million for the shares to the sum of £1.69 million referred to in the Share Sale Agreement. Mr Gordon had been prompted to say this apparently having just (or recently) noticed the figure of £1.69 million in the Share Sale Agreement. Since this precise suggestion emerged after Mr Deir gave his evidence it was not something about which he was asked. I rather suspect that had the boot been on the other foot, and Mr Deir had first suggested something like this when he gave his evidence, it would have been suggested that he was making up his evidence as he went along. Mr Lewis has, however, invited me to say that Mr Gordon was "a singularly impressive witness, who gave coherent and compelling answers". Mr Gordon accepted that there was no contemporaneous evidence that this was the value attributed to the aircraft and the information from the accountants then acting for LyddAir Ltd (who subsequently acted for LAA) makes no reference to any such figure and there is no reference to any payment of that figure. However, when reviewing the papers for the purpose of preparing this judgment, I noted that in his detailed response to the Audit Report 2007 Mr Deir said that the value of the aircraft at the time it was acquired was "in the region of £10,000 as it required an engine overhaul which was carried out in 2005". He was not asked about this and, accordingly, I really have no clear picture of his answer to the suggestion that the value attributed to the aircraft at the time was £10,000. Since the Bill of Sale (to which I will refer shortly) refers to a nominal consideration of £1, it will be appreciated that endeavouring to form a concluded and satisfactory view about precisely the circumstances in which this aircraft came to be transferred from one party to another and for what consideration is extremely difficult. Indeed it is rendered the more difficult by Mr Gordon's evidence that however the substance of the agreement was concluded, it was simply done "on a handshake". Given that Mr Gordon said in his witness statement that by mid-2004 it was clear to him that he could not continue working with Mr Deir because he disagreed with his management style, it is difficult to judge the basis upon which any deal "on a handshake" was concluded.
As I shall indicate shortly, Mr Gordon did not appear in the picture concerning the Piper Warrior again until 2008. The story about its ownership and the financing of its running costs has to be taken up in the context of how the aircraft was referred to in LAA's accounts thereafter and an Inland Revenue investigation into the affairs of LAA which took place in 2007/8.
The Fixed Asset register of LAA for the year ending 31 December 2005 included as an "addition" during the year an aircraft said to be worth £20,000. Mr Mutlaq was responsible for including that figure and it does not appear to be disputed that it was intended to relate to the Piper Warrior. However, the register for the following year did not include any figure in relation to an aircraft. This matter was picked up by LAA's accountants, Messrs Phipps & Co, after the Inland Revenue investigation and two letters, apparently drafted by the accountants, were signed by Mr Deir and Mr Mutlaq respectively on 11 June 2008 dealing with the situation. Mr Deir said that he had purchased the aircraft on 6 September 2004 "as per the attached Bill of sale" (to which I will refer shortly). He asked the accountants to "reverse this entry out of the books including any depreciation for this period", the explanation being that the aircraft had been sold direct from LyddAir to him and that it "was only registered in [LAA] as a formality." Mr Mutlaq's letter confirmed that he had posted the entry for the aircraft in the fixed assets register has a value of £20,000 "from 1st February 2005 to 31st December 2006 in error". The reference to 31 December 2006 was itself an error: he should have said 31 December 2005.
That is how the matter was addressed within LAA in June 2008. As I have indicated, in the meantime representatives of the Inland Revenue had raised questions about aspects of the accounts of LAA and one of those aspects was the Piper Warrior aircraft. The first meeting between two HMRC officers, Mr Small and Mr Carter, and representatives of LAA took place on 28 November 2007. Mr Deir was present, as was Miss Ricketts, the financial controller at the time (Mr Mutlaq having ceased to work for LAA in May 2007) and Mr Ede, the accountant.
The notes prepared by Mr Small and Mr Carter concerning the Piper Warrior were in the following terms:
"Mr Deir explained that he purchased the aeroplane personally but because he was not a UK citizen he had to register it in the company name. He now has citizenship and has transferred the plane's registration. No payments were made towards the plane by the company other than for fuel.
Miss Ricketts explained that they have now reviewed the fuel position as they realise that paying for all the fuel, including private fuel, constituted a benefit. Miss Ricketts showed Small her calculations taking account of payments due to Mr Deir for business fuel. Mr Deir will be making payment to the company for fuel at the going rate.
Small confirmed that he is happy that the making good is taking place and no benefit would arise. Miss Ricketts confirmed that this procedure will now stay in place and the company will be charging Mr Deir for private fuel."
It is not entirely clear when those notes were prepared, but it would be surprising if they were not prepared at or about the time of the meeting. The notes of this meeting and the meeting referred to in the next paragraph were sent to Mr Deir under cover of a letter of 18 December 2007. In relation to the "company aeroplane" the logs for the plane and, where possible, details of the purpose of each flight were requested. Mr Deir replied to that letter on 18 February 2008 and supplied the logs. Mr Small had a further meeting on 19 February 2008 attended by Miss Ricketts and another representative of the accounts department. He then wrote on 27 February 2008 and the passage relating to the aircraft was as follows:
"Thank you for supplying a copy of the logs for the company owned aeroplane.
I note that Mr Deir uses the plane for regular trips between Oxford and late, can you please explain the purpose of these trips providing records as appropriate. In addition can you supply details of the other trips
including purpose of flight and passengers.
I note that the only other pilot
is Weeks, can you please explain who this is and the reason for flying the company aeroplane, again providing records were available.
Finally, can you please provide
full details of the plane, including make, model, date of purchase, approximate market value at purchase. Did the company own a plane before this? If so please provide these details as well."
A further meeting had taken place on 30 November 2007 (see paragraph 222 below) at which a discussion concerning the use of planes took place. The notes are not very clear as to which plane was being referred to and the matter was taken up in subsequent correspondence to which I have just referred.
On 15 April 2008, Miss Ricketts replied to Mr Small's letter dated 27 February 2008 and said this about the "company aeroplane":
"We must first make the point that the aeroplane is not owned by the company. It is not shown as a company asset in the accounts and it is not insured by the company. Instead it is provided to the company by Mr Deir in exchange for the company paying for any fuel used. Thus the payment for fuel is effectively a payment for using the aeroplane on business. Most of the business uses flying around the immediate area of Lydd Airport so as to show off the advantages of its location. Although it is not really relevant since the aeroplane does not belong to the company, we can inform you that Mr Weeks as the pilot to ferries planes around for us."
Mr Small took up the matter further in a letter dated 29 April 2008 in which he said this:
"During my initial meeting with Mr Deir on 30 November 2007, he explained that the company owned an aeroplane and that he was in the process of personally buying another plane. This was recorded in my notes forwarded to the company on 18 December 2007.
Your letter contradicts this statement. Can you please provide evidence of the ownership of the aeroplane, or details of the plane's registration.
If payments are made for fuel to Mr Deir can you please provide a full breakdown of these payments and the journeys for which they are made, including purpose of journey?
You mention that Mr Weeks ferries planes around for the company. Can you please explain the capacity in which is engaged to carry out these duties and whether or not he is paid as an employee or otherwise?"
On 23 May Miss Ricketts replied as follows:
"Mr Deir acquired the aeroplane from [LyddAir Ltd]. At the time of the acquisition, Mr Deir was not a British citizen and the aeroplane could not be registered in his name. As permitted by law the aeroplane was registered in the name of [LAA]. Since Mr Deir has subsequently obtained citizenship, it is now registered in the name of one of his companies. The registration document is enclosed.
Although during discussions with Mr Deir he may have referred to the aeroplane as "the company plane", this was merely an expression to indicate that this was the plane the company used. Mr Deir was looking at buying another plane but this was to be in addition to the one referred to here.
With regard to Mr Weeks, he is not and has not been an employee of the company. The fair is the aeroplanes for is free of charge simply because this enables him to enjoy being able to fly."
I have seen no further correspondence between the Revenue and LAA and I assume that all matters, including the issues arising from the use of the aircraft, were resolved eventually.
The registration document referred to in the letter from Miss Ricketts of 23 May showed that the Piper Warrior had been transferred to Jet Connections Ltd on 4 January 2008.
It was shortly after this that the two letters dated 11 June 2008 (referred to in paragraph 216 above) were written. Mr Mutlaq, who since his departure from LAA in May 2007 (which he says was manufactured by Mr Deir) has returned to work as the Finance Manager of LAA and other associated companies, gave his initial account of the history of the Piper Warrior in his witness statement where he said that he was "quite certain that ownership of the plane
transferred in October 2004 from Lydd Air Ltd directly to London Ashford Airport Ltd and not to Mr Deir personally." He went on to say this:
"I was then instructed by Mr Deir to sign a letter to Phipps & Co [LAA's] accountants at the time to state that the Piper had been posted as an error in the fixed assets in the accounts for 2005 - 2006. I did sign the letter, but I knew that the entry was not an error."
At the time he gave his evidence, therefore, Mr Mutlaq said that what he had said in the letter referred to in paragraph 216 above was untrue. He signed the letter at a time when he was working at the Golf Club where he went after his departure from LAA. He said that he signed the letter by mistake and that "maybe [he was] in a rush".
After Mr Deir's departure from LAA and after this litigation was commenced Mr Mutlaq prepared a letter from Mr Jonathan Gordon to sign concerning the Bill of Sale to which I will refer in paragraph 230 below. The relevant part of the letter, dated 18 February 2009, was as follows:
"Can you please confirm by signing below that the Bill of Sale was signed on behalf of Lydd Air Limited (not the actual owner of the aircraft) and was executed only for tax purposes. I believe you were informed by [Mr Deir] that this matter was approved by Sheikh Fahad to issue such a document."
Mr Gordon did indeed sign the letter indicating that that paragraph was true. I will return to what he said about that letter shortly.
The Bill of Sale was in the following terms:
"For and in consideration of £1 LyddAir Limited
who is the owner of the full legal and beneficial title of [the Piper Warrior aircraft]
dated this 6th day of [September] 2004
hereby sell, grant transfer and deliver all rights, title interests in and to such aircraft unto [Zaher Deir] of [address given] to have and to hold singularly the said aircraft for ever, and warrants the title thereof."
It was signed by Mr Jonathan Gordon in his capacity as a director of LyddAir Limited.
Until Mr Deir's letter to Messrs Phipps & Co of 11 June 2008 (see paragraph 216 above) no reference had been made in any other document to this Bill of Sale even though it purports to be dated 6 September 2004. That date has been added in handwritten form. Mr Gordon said this about the Bill of Sale in his first witness statement of 27 July 2010:
"In the summer of 2008, I cannot be sure of the precise date, Mr Deir approached me to discuss the Piper. Whilst I cannot be exactly sure, I believe the indicated to me that Sheikh Fahad had agreed to transfer the Piper to him by way of a bonus which would help him for tax reasons and as a consequence he wanted the Piper transferred into his sole name. He stressed to me that Sheikh Fahad, the board of directors and the company accountants had approved this. I saw no reason to disbelieve him and, in any event, it had no effect on my companies. The Claimant produced a bill of sale which he asked me to sign, on behalf of Lydd Air. Because of the background of being told that everything was above board and agreed, I did not treat this document with the importance I might have otherwise given it. I went ahead and signed the bill of sale. This is definitely my handwriting, but at the time I signed it, I do not believe I dated it - it is not unusual to leave a bill of sale undated. So far as I can see, the date on the bill of sale was not inserted by me."
Mr Gordon went on to say that he was certain that the date inserted was not correct and that he did not sign a bill of sale on 6 September 2004. It was, he said, in the summer of 2008, "not long before Mr Deir left the airport." He also referred to the letter he signed subsequently at the request of Mr Mutlaq to which I referred in paragraph 228 above. That letter, of course, referred to the purpose of the bill of sale as being related to "tax purposes". Mr Gordon said this:
"I am not sure whether that is correct. I repeat that at the time he told me it was because Sheikh Fahad had indicated to him that he could take the plane by way of a bonus and any inference to tax he may have made would not have registered as being important to me."
Mr Gordon made a second witness statement on 8 October 2010, and thus on the fourth day of the trial, in which he corrected the paragraph to which I referred in paragraph 232 above. He said this:
"I have also noticed an error in paragraph 12 of my first statement. In that statement, I stated that "the Claimant produced a Bill of sale
". This is not correct. The Bill of Sale was created by me on my computer at Mr Deir's request. The reason for this error is that the statement was taken from me by the Defendant's solicitor Mr Stevens at the airport and prior to the meeting, I had not had an opportunity of thoroughly reviewing my records. Mr Stevens produced and showed me a copy of the Bill of Sale, and at that meeting it did not occur to me that it was important as to who had actually prepared the document."
Mr Gordon went on to describe what his computer records showed, namely, that the document was created and modified on his computer and that, according to the electronic history revealed when investigating the "properties" of the document is that it was "created" on 17 February 2009, "modified" on 11 June 2008 and then "accessed" on 27 September 2010. I should say that no one has explained satisfactorily how a document can be "modified" before it has been "created" and I think I have to proceed on the basis that it was "created" on 11 June 2008. This, I should say, is what Mr Gordon says in this second witness statement and the reason he gives for this is that two days earlier, on 9 June, he had received an e-mail from Ms Lobb referring to a conversation between Mr Deir and Mr Gordon and giving Mr Gordon Mr Deir's address.
One of the documents discovered and disclosed by Mr Gordon was an e-mail to him from his brother, Robin, dated 30 May 2008 which referred to something said to him by Mr Deir during a meeting in relation to the Piper Warrior aircraft. The relevant part of the e-mail reads as follows:
"He asked me during the meeting for a bill of sale for the VU, value £10 (he had mentioned it to you) as he has personal tax issues.
Would you like me to mock something up based on the US BoS we have seen?
Not sure of the date Etc?"
'VU' presumably relates to the registration number of the Piper Warrior (see paragraph 202 above). Indeed the aircraft is frequently referred to in that way in the documents.
Mr Jonathan Gordon's response to this e-mail was short and simply said "Will discuss BOS".
As I have said, Mr Gordon's final position in relation to the Bill of Sale is that it was probably created on 11 June 2008 and was, as he had said previously, undated when it was sent or given to Mr Deir. He was unable to say why it might have been accessed (I avoid the use of the word "created" or "modified") on 17 February 2009 although the inference seems to me to be clear that he must have accessed it in some way in relation to the letter prepared by Mr Mutlaq that he signed the following day (see paragraph 228). He said that, although the Bill of Sale was undated, he would not have countenanced any backdating of the document because, as he put it, "you cannot change what is a matter of record" and the record shows that the aircraft was transferred from LyddAir Ltd to LAA in October 2004. He said that when he handed over the Bill of Sale it was not in his mind that Mr Deir intended to backdate it. He said that Mr Deir "gave [him] the clear feeling that it was for future use".
I have used the expression "tangled web" generally about this case previously (see paragraphs 4 and 152 above). Anyone reading the last 39 paragraphs of this judgment will think it an appropriate description of this particular part of the case and have in mind the famous words of Sir Walter Scott in 'Marmion':
"O what a tangled web we weave
When first we practise to deceive!"
It is very difficult to determine who is trying to deceive who and for what purpose on this particular issue. I do not consider that I have received exclusively accurate and reliable evidence from anyone on this issue and in some respects I believe I have received untruthful evidence. To the extent that I have not already done so, I will indicate my conclusions on the evidence I have received and endeavour to see whether it leads me to a conclusion that determines the question of the true ownership of the Piper Warrior.
Whatever Mr Deir may now say, the passage in his witness statement referred to in paragraph 205 above plainly gives the impression (and, in my judgment, was intended to give the impression) that the Bill of Sale was executed by Jonathan Gordon on 6 September 2004. When asked about this by Mr Lewis, Mr Deir said that his witness statement did not say that Mr Gordon signed and dated the document on the same day. I suppose that on a strict analysis of the expression "
Jonathan Gordon executed the appropriate Bill of Sale on behalf of Lydd Air dated 6 September 2004", that is correct. However, it is an expression which, on any view, does not tell the whole story and, as I have said, it was, in my view, intended to suggest that the document was created and certainly dated on the date that it bears. Mr Deir did, however, accept when giving his evidence that when the Bill of Sale was given to him it was undated and that it may have been created after 6 September 2004, but he was wholly unspecific about when that was, save to say that it was not as late as June 2008. He said that he did not know in whose handwriting the date of 6 September 2004 was written. He said that he "may have asked somebody" to put the date in. He suggested that the document had been kept in a file.
I do not accept this account. Whilst, as will already be apparent, I have some concerns about Mr Gordon's evidence, the evidence that this document was created on 11 June 2008 seems to me to be overwhelming. At all events, on the balance of probabilities, I find that it was created then. Indeed, because it was on 11 June 2008 that Mr Deir wrote to Phipps & Co referring to the Bill of Sale (which, as I have observed, had not been referred to in any other document at any earlier stage), it seems to me to be clear that it was on that day that the undated Bill of Sale was handed over to him. Leaving aside for the moment any possible similarity between the handwriting of the date on the Bill of Sale and Mr Deir's handwriting, I am unable to understand why anyone else other than Mr Deir would have had an interest in putting in the date of 6 September 2004. Why should it be necessary to ask "somebody" to put the date in when he was the one person who knew the date clearly? There is, however, a marked similarity between the way the figure '4' is written on that document and the way the same figure is written on another document in one of the many trial bundles which is acknowledged to be in Mr Deir's handwriting (the document referred to in paragraph 165 above).
Putting all these various matters together, I am satisfied that the Bill of Sale was created on 11 June 2008, signed by Mr Gordon on that date and dated 6 September 2004 by Mr Deir on that date. I have no doubt that the document was created in the context of concerns about the taxation implications concerning the aircraft and its use. I cannot be more specific than that and have received no expert evidence to guide me towards an understanding of those implications. However, the contemporaneous evidence (in the form of Mr Robin Gordon's e-mail and the general context of the correspondence between the Revenue and LAA) is that there may have been personal tax implications for Mr Deir or, looking at it another way, implications for LAA by reason of the failure to pay tax on his behalf for any benefits in kind he may have received. If it was the latter, Mr Deir was by this time (June 2008) fully aware that his days at LAA were numbered and that his life was likely to be made difficult once he departed finally. He may have been concerned that any tax liability would fall upon him personally when, as he would suggest, in substance it should have been a matter for LAA.
But where does all this leave the central issue of the ownership of the aircraft? The taxation situation is not a matter before me and I am not required to form any view about it save to the extent that it may explain why the witnesses who have given evidence have done so in the way they have. My distinct impression is that Mr Deir, Mr Gordon and Mr Mutlaq have been concerned that their actions could have repercussions in that context. As I have said, it is no part of my task to assess whether that is or is not so as a matter of fact.
Accepting (as I have done) that Mr Deir applied the date of 6 September 2004 physically to the Bill of Sale on 11 June 2008, and thus rejecting the evidence that he gave about this, does that negate his case that the intention behind the transaction (which undoubtedly did take place in September 2004) was to transfer the beneficial ownership of the aircraft to him? Since the Bill of Sale says expressly on its face that the sale was to him personally, the answer to the question posed is obviously "no". Mr Gordon in his first witness statement suggested that the reason for the production of the Bill of Sale was in some way to give effect to a promise of a bonus by the Sheikh to Mr Deir by transferring the aircraft to him. It is not clear to me whether he abandoned that suggestion completely: I do not think that he did even though he corrected the suggestion that it was Mr Deir who produced the Bill of Sale and asked him (Mr Gordon) to sign it. At all events, if and to the extent that he continued to maintain that that formed part of the background to the production of the Bill of Sale, it is simply untenable. If his evidence is to be accepted that the original intention was that the aircraft should go to LAA as part of the Share Sale Agreement, what right did LyddAir Ltd have in June 2008 to effect a sale or transfer of the aircraft (already owned by LAA) to Mr Deir personally? The answer, of course, is that it had no right to do so at all.
It is, of course, for the Defendants to establish that Mr Deir "converted" this aircraft to his own use. The relevant facts must be established on the balance of probabilities. Whilst I consider that there are some unanswered questions about the precise circumstances (see paragraph 249 below), I have to ask myself whether those unanswered questions are such as to undermine what Mr Deir has been saying fairly clearly and consistently since the issue was first raised by the Revenue in November 2007, namely, that he had acquired the aircraft personally at the time and that it was only put in LAA's name pending the grant to him of British citizenship. I will answer that question shortly, but I should first address the question of whether the Defendants have proved the contrary. It seems to me that they do have to rely to a large extent on the evidence of Mr Jonathan Gordon. That is doubtless why Mr Lewis was anxious that I should make the finding to which I have referred above. However, Mr Gordon has signed two witness statements to each of which a statement of truth was appended, one of which he had to disown in a significant way before he gave his evidence. Without retracing the ground fully, I regret to say that he appears to have been prepared to sign various documents at various times without thinking clearly whether the contents were truly justified. I do not consider that, on this overall issue, I can place much reliance upon what he has said. If anything, because he (and, by inference, his brother) was prepared to go along with the preparation of the Bill of Sale that did evidence the transfer of the aircraft initially to Mr Deir (because Mr Gordon must have appreciated that it would be backdated to the time of the transaction), that does go to support Mr Deir's case. I do not, of course, have any particular understanding of why Mr Gordon now wishes to be seen to be supporting the Sheikh in this litigation, but I think that his evidence on this issue has been generated to that end. Regrettably, I do not consider that it is persuasive.
Whilst Mr Mutlaq put forward his own view about the situation (see paragraph 226 above), I do not think it can be said that he was able to offer any evidence from a personal perspective that informed the issue of the identity of the party who was to become the beneficial owner of the aircraft in September 2004. In any event, unfortunately his own evidence on this whole issue was itself not very satisfactory and I do not think that I can place a great deal of reliance upon it. He did endeavour to suggest that the aircraft was referred to in the assets position of LAA for the year ended 31 December 2004 (as it should have been if it was then owned by the company), but his evidence about this was very unspecific and I cannot accept it. Indeed the lack of reference to the aircraft in the financial statements, as an objective piece of evidence, does support the proposition that the transaction concerning the aircraft was of a "private" nature and was not directly a matter of concern for the company.
The unanswered questions, in my view, relate to whether any, and if so what, consideration passed (or should be deemed to have passed) to LyddAir Ltd for the transfer of the aircraft. According to the letter from Phipps & Co to Mr Gordon dated 1 October 2010, the transfer value recorded in the financial statements of LyddAir Ltd was £25,745, but there is no other evidence to support any such payment as indeed there is no evidence to support the payment of £10,000 referred to by Mr Gordon in his evidence unless one accepts his evidence that the figure of £1.70 million was reduced to £1.69 million because of this transaction. I am really in no position in which to be able to form a view about that assertion and, to the extent that it now forms part of the case advanced on behalf of the Defendants, it is one that I have to say is not established on the balance of probabilities. When reference to the aircraft was made in LAA's accounts (for the year to 31 December 2005), the figure attributed to it was £20,000. By then, of course, work had been done to it of some considerable value. But none of this seems to tie in with any other piece of evidence to which my attention has been drawn.
Given that the transaction was, on my finding, intended to benefit Mr Deir personally, one would have expected to see some evidence somewhere of a payment by him for its acquisition. However, none can be found. I do not think there can be any doubt that this transaction was, in reality, part and parcel of the discussions going on towards the end of 2004 about the sale of the 25% of Mr Gordon's remaining holding in the airport even though the actual sale and transfer of the aircraft is not referred to (even obliquely) in the Share Sale Agreement. When responding to the 2007 Audit Mr Deir said that "[the] aircraft was retained by [Mr Deir] from Lydd Air (Jonathan Gordon) after we had concluded the sale of London Ashford Airport". It was at that point that he referred to the value as being £10,000: see paragraph 214 above. When commenting on issues raised about the maintenance costs of the aircraft in that audit, he said the following (addressed to Mr Al-Nouti) on 22 May 2008:
"
Please allow me to indicate to you the benefits which the company gains from operating this aircraft:
- I have used the aircraft on many occasions to show members of the Council, general public, consultants etc
the airport's location from the air which has been extremely helpful in our planning application cause.
I have used the aircraft as a means of transport to conduct my business meetings when they are taking place away from London Ashford airport. Doing so has cut down a lot of my travelling time which hasn't return allowed me to attend the office longer hours.
Also I have used the aircraft on occasions to travel to my home in Oxford which again is allowed me to spend more time in the office.
In my opinion the operating this aircraft has been a great asset to the company and also to me on managing and reducing my travel time. So, it is a well spent investment.
I have made arrangements to have the aircraft transferred from the company name and I will be paying the company £30,000."
Mr Lewis, in his Closing Submissions, submitted that this confirmed that Mr Deir "did not own the Piper" and that what he was proposing was to pay £30,000 for the purchase. He drew attention to a valuation obtained by Mr Deir on 8 May in the figure of £30,000. The valuation was, I understand, provided by Lydd Aero Club (which is a flying school based at Lydd Airport). It was expressed in the following terms:
"I have looked at the above aircraft and its documentation. In current market condition you can expect it to realise £30,000 under normal circumstances.
As you are aware this is a pre-1980 model with average paint and interior as well as antiquated and incomplete (no DME) avionics. However, it has good airframe and engine times which may attract both private and training buyers.
Let us know if we can be of further help."
However, Mr Deir was not asked about this when he gave his evidence, having said this in his witness statement:
"In my response to the 2007 audit report provided to LAA in May 2008 (I had only been supplied with the report in April 2008), I made it clear that I had made arrangements for the aircraft to be transferred into my name from the name of LAA. This was because as I have explained I had by then become a British citizen. I offered to pay LAA £30,000. This represented, not the value of the aircraft but the amount that had been spent by LAA on the new engine, the new propeller and the annual inspection costs."
The way in which the valuation letter was expressed was consistent with Mr Deir asking what he could achieve if he sold the aircraft at that time. It is, of course, possible that this was the way he asked for a valuation thinking that he might need to resolve the issues arising from the audit by making an offer of its market value even though, in his eyes, he was already the owner of the aircraft. Contrary to the way he expressed himself in the witness statement, £30,000 did represent (at least on the basis of the recent valuation) the "market value" of the aircraft. However, as I have said, I do not think I can conclude from the terms of the valuation and the fact that it was requested an implied concession at the time that he did not own the aircraft. That would have been inconsistent with everything he had been saying since at least November 2007. Since he was not cross-examined about the valuation and the background to it, I do not think that I can or should draw any particular inference adverse to his case from it.
What he appears to be doing in the response to which I have referred is challenging the assertion made in the Audit report that he should be responsible for all the running costs. By the time he composed his response to the 2007 audit report the aircraft had been in the name of Jet Connections for several months, but I think that what he said in his response reveals something approaching the truth about the use of the Piper Warrior, particularly given that its use by him on a regular basis was, I am satisfied, well known to everyone at Lydd Airport. I doubt very much that the Sheikh was unaware of it, particularly as Mr Al Nouti and Mr Mutlaq were occasional passengers in the aircraft, but if he was not personally aware of it, enough people within the FAL Group were aware of it for its use to be treated as well-known and readily accepted. There has been no serious challenge to what Mr Deir claims to have been the use to which the aircraft was put and, on the basis that he was truly the beneficial owner, then there will have been a substantial amount of use that will have enured to the benefit of the company and, of course, some that will have been of benefit to him personally. The taxation implications of this are, strictly speaking, not relevant to those issues as they arise within the company itself. How the company treats the benefits arising from, for example, the use of fuel or the provision of maintenance may be different from the way in which the Revenue treats them.
How the company viewed the financing of the use of this aircraft during the period from which it was acquired until it was transferred to Jet Connections is very difficult to determine on the evidence. I believe it was yet another "non-issue" until the beginning of the rupture of the relationship between the Sheikh and Mr Deir in mid-2007. Given that, on my finding, the aircraft was owned beneficially by Mr Deir from the outset, any issues arising from the alleged conversion of the aircraft do not arise. However, Mr Deir recognises that he must make a contribution to the running costs of the aircraft to reflect the personal element in its usage. It seems to me that that must include, in the absence of any evidence of a capital payment by him at the outset, a contribution to its acquisition cost given that, in the broadest sense, the aircraft formed part of the discussions leading to the deal between Mr Jonathan Gordon and the Sheikh towards the end of 2004. The extent to which it was taken into account in the overall figure is unclear, but it does not appear to have been an asset with a value of less than £10,000.
I could put the matter over for assessment by a Master but, as I have already made clear, I am anxious to bring an end to this litigation provided that no injustice is done in the process. I propose to award the Defendants the £30,000 that Mr Deir offered in May 2008 (not with any interest because it could have been accepted then even if only "on account"), the basis being broadly as indicated in Mr Deir's witness statement (see paragraph 252 above) although I would regard £10,000 of that as being referable to an initial acquisition cost and the balance as a contribution to the costs identified in his witness statement. I will award also a sum equivalent to 25% of the running costs the aircraft (including fuel) between 6 September 2004 and when the aircraft left Lydd Airport finally (which I believe was in April 2008) to the extent that these running costs are not embraced in the annual inspection costs to May 2008 (a proportion of which is to be taken to be included in the balance of the £30,000 after deduction of the £10,000 referred to above). The parties should be able to agree such a figure. If either party feels aggrieved by this approach and wishes to have a more detailed analysis, I shall need persuading that putting the matter over for further consideration by a Master represents a proportionate expense in the context of the amounts involved.
The IT claim
The allegation here is that, on his departure from Lydd Airport in September 2008, Mr Deir arranged for someone to raise electronic files from the LAA computer system. The motive, it was suggested, was to "cover his tracks" in respect of Jet Connections and to "destroy evidence of his wrongdoing generally". The quantum of the claim was originally put at just over £9,400, but on further analysis during the trial it was reduced to £3,974.
It is not disputed that Mr Deir handed over a significant number of "hard" documents (including files of documents) to Mr Mutlaq on his departure because an inventory of these documents was drawn up, signed and agreed. Furthermore, for reasons I have given in a number of places in this judgment, a great deal of what has been characterised on the Sheikh's behalf as "wrongdoing" on Mr Deir's part was carried out quite openly during the period of three and a half years or so when no criticism of his actions as managing director of LAA (or in any other capacity) was made. To that extent, during that period at least, there was no motive for undertaking the kind of activity to which this head of counterclaim refers. I recognise that for the last 12-15 months of his time at Lydd Airport he must have felt under siege to some degree and could, therefore, have had the motive for doing something like this, if only to frustrate any process of subsequent disputation. Most people know, however, that it is very difficult, if not impossible, to delete electronic files completely such that they can never be recovered.
It was accepted on the Sheikh's behalf that Mr Deir would not have had the technical ability to delete his user account and his "My Documents" folder, which appeared to have been the actions taken. The only person within what might be termed Mr Deir's "camp" was Mr Simeonidis who certainly worked with Mr Deir in an IT capacity for a fair part of the time they were both at Lydd Airport. He denied absolutely having anything to do with the actions to which I have referred. He did say, in unchallenged evidence, that it was the policy of many companies to delete the user account of an employee when he or she leaves so that the ex-employee does not have access to the system. He also said that, if that had occurred in this case, the "My Documents" folder would have disappeared too. However, he added that it was not LAA policy to store company documents in the "My Documents" folder but on the various departmental folders.
If that is correct (and, as I have said, the witness called on behalf of the Sheikh could not dispute it) then, even if the user account or "My Documents" folder had been deleted on Mr Deir's instructions, it would have represented no more than a nominal breach of contract because no damage would have flowed from it.
One of the reasons for the reduction in the quantum of this head of counterclaim, subject to liability, seems to have been the revelation during the trial that the invoice from the company engaged to retrieve the electronic information referred to the retrieval of this information because of a "hardware fault". Obviously, if the loss of information was due to a hardware problem, that is plainly nothing to do with the kind of allegation made here. Mr Proctor, who gave evidence on behalf of the Sheikh, did accept that there was a hardware fault, but said that it occurred subsequent to the quotation from the retrieval organisation. However, certain e-mails written at the time do not support that recollection.
Whilst I cannot wholly discount the possibility that Mr Deir instructed someone to interfere in some way with the computer system on his departure, if I ask myself the question, has it been proved on the balance of probabilities that he did, my answer has to be "no". As I have already indicated, even if he had done so it could only have amounted to a nominal breach of contract in any event.
On that basis I do not consider that this head of counterclaim has been established.
Conclusion
I have, therefore, found in Mr Deir's favour in relation to the claim for director's fees, albeit on a somewhat more restrictive basis than the way the claim was advanced. A re-calculation of the claim will be required in accordance with the conclusions indicated in paragraphs 123 and 124 above on the basis of a daily pro rata figure for each relevant directorship (see now the table in paragraph 278. For my part, I see that as a claim that has succeeded against the Sheikh in his own right: see paragraph 126 above.
I have found in favour of the Defendants (or those that are relevant) on certain of the heads of counterclaim and have rejected others. Some consequential calculations will have to be done.
I will invite submissions on the final form of the order if no agreement about it is reached.
I would express my appreciation to Mr Hill-Smith and Mr Lewis for their assistance in a case not free from difficulty. I am very grateful also to Miss Emily Betts whose typed notes she provided to me and to all parties. They afforded a useful check against my own note in a case where some witnesses were not always easy to follow and it is testimony to their accuracy that Mr Hill-Smith referred to them several times in his Closing Submissions.
Postscript
In accordance with usual practice, the draft judgment was sent to the parties on 18 January with a request that any "typing corrections and other obvious errors" should be drawn to my attention. I received an initial response from both Counsel.
In a document entitled 'Factual Errors/absence of findings' dated 24 January Mr Lewis said in relation to my conclusions concerning the claim for director's fees (see paragraphs 118-120 above) that "no findings of fact have been made as to when the Claimant's 'active management' ceased (in respect of the relevant companies)." He suggested that because, as he put it, 'active management' was "not part of the Claimant's case
understandably no evidence was led on this issue by any party." Accordingly, he invited me "to find that the directorship fees claim fails, or to reject the claims as unproven from the point of view of quantum, on the premise that the Claimant has not, and cannot on the evidence before the Court, prove periods of active management and therefore quantify loss." Mr Hill-Smith also reminded me that I had not dealt specifically with two companies in the context of the claim for director's fees. Accordingly, I invited further submissions from both parties which I received on 27 January. This postscript is designed to deal with the issues thus raised. As will become apparent, I have revised slightly the draft judgment originally sent to the parties to reflect some of the submissions made. For the avoidance of doubt, I should, perhaps, emphasise that this postscript forms part of the judgment and the reasoning that lies behind it.
In relation to the issues raised by Mr Lewis concerning the expression "active management", there are two initial matters I would mention, both of which I would have thought were obvious from the terms of the judgment: (a) my conclusion was that "active management" was required before any director's fees became payable (see paragraph 123 above); (b) I said also in relation to the need for "active management" (at paragraph 120) that "where more than merely nominal duties were carried out, the fee would be payable". "Active management" plainly did not, therefore, necessarily mean that, for example, daily attention to the activities of the relevant company was necessary to engage the obligation to pay fees and to continue paying them. Indeed that would not have been necessary given the conclusion I reached about what lay behind the Sheikh's commitment to pay director's fees to Mr Deir: see paragraph 116. A readiness to act in a role that was more than merely that of a nominal director in a company that still had a potential trading future would have been the way I would have defined the essential test of "active management" for this purpose had I realised that it would not be possible for the parties to agree on an end-date in relation to a particular company. It was, perhaps, over-optimistic of me to think that they might, but given that Mr Deir had confined his claim to certain cut off dates (see paragraph 89 above), it might be thought reasonable to have assumed that agreement could have been reached once the decision in principle about the payment of director's fees had been made.
In the light of the foregoing, and in the light of the fact that in the draft judgment I had omitted to mention specifically Barton House (No 41) Limited and Lydd Airshow Limited, I have revisited paragraphs 123 and 124 of the draft judgment and those paragraphs now deal also with those two companies.
I have not made any further alteration to paragraph 124 notwithstanding the suggestion made by Mr Lewis that it contained an implicit finding that Mr Deir had not been appointed Managing Director and paid a salary in relation to the two companies that are the Fifth and Sixth Defendants in this case, namely, Lydd Golf Club and Driving Range Limited and Lydd Golf Club Limited. He submitted that such an implicit finding represented "a clear factual error". I do not agree with his analysis for a number of reasons.
The precise role of each of these two companies was not fully explained in the proceedings: the nearest is the evidence of Mr Al Nouti who said that Lydd Golf Club comprised each of these two companies. He suggested that Lydd Golf Club Limited was not a trading company, but Mr Deir has said that he was actively involved in its management.
As a reading of paragraphs 123 and 124 of the judgment will demonstrate, I was quite firm in my view that director's fees were not payable in relation to LAA because it was to that company that Mr Deir was immediately appointed as Managing Director in January 2004 and in respect of which he was paid a salary effectively from the outset. He had been appointed director of LAA on 21 December 2003. As paragraph 124 demonstrates, I was less clear about the position in relation to the two companies associated with the Golf Club and could see the argument that his involvement in those two companies was all part and parcel of what I termed the "LAA picture". I omitted to mention specifically Mr Deir's letter to the Sheikh dated 20 January 2004 (see paragraph 42 above) and the "proposed offer" from the Sheikh referred to in paragraph 47 both of which lend support to the notion that Mr Deir was to be appointed Managing Director of Lydd Golf Club at the same time as his appointment as Managing Director of LAA (and indeed Lydd Air) and be paid an overall salary of £5,000 per month in respect of all those appointments. However, on balance, I felt that the evidence led to a different conclusion concerning the payment of director's fees in respect of these two companies because of the date upon which Mr Deir was made a director of each. It is, of course, axiomatic that a person cannot hold the position of managing director unless and until he or she is a director. At no stage has Mr Deir sought to claim director's fees prior to 4 October 2005 which, in my view, supported the conclusion that he was entitled to seek director's fees in relation to these companies only from that time. It was this significantly later appointment as a director that led me, on balance, to distinguish the position between his role with LAA and his role with the companies associated with the Golf Club.
Whilst I do not resile from the conclusion expressed in paragraph 120 that the intention to pay director's fees did not extend to "those companies where Mr Deir was to be appointed managing director and for which he was to be paid a salary", it is clear from the context (namely, the next sentence in that paragraph) that what I had in mind specifically was his appointment as managing director of LAA. It is clear from the next paragraph that I did not look on the companies associated with the Golf Club in the same light. If a conclusion about whether Mr Deir was ever appointed formally as managing director of those companies is relevant, then the short point is that there is no real evidence, one way or the other about it, other than the inference (that I am prepared to make) that at some stage before the letter he wrote to the Sheikh on 2 August 2007 (see paragraph 85 above), which refers to his position as managing director, he had been appointed managing director. Equally, given the fact that he could not have been appointed managing director before he was appointed a director, his appointment as managing director could not have been before 4 October 2005. However, for the reasons I have given I do not consider this disentitles him from receiving director's fees in relation to these companies: at the earliest, his appointment as a director and managing director would have been about 21 months after his appointment as managing director of LAA and about 10 months after, on my findings, Sheikh's commitment to the payment of director's fees was confirmed.
I will deal below with the specific assertion made by Mr Lewis that "active management" was not an issue in the case and that the Sheikh has been disadvantaged by my conclusion that it is a relevant matter for consideration (see paragraph 269), but I do not understand how it could be said that no evidence about this issue was led by any party.
In the first place, in a number of instances Mr Deir's witness statement did deal with the issue of whether his involvement was more than being merely a nominal director: see, for example, his evidence in relation to Barton House (No 41) Ltd at paragraph 123 above, his evidence (at paragraph 90 of his witness statement) that he was involved in Lydd Golf Club and Driving Range Ltd and of Lydd Golf Ltd and his evidence concerning Phoenix Aero Engineering (see also paragraph 123 above). It is plain from other evidence in the case that in relation to FAL Aviation, for example, he was actively involved from July 2005 (see also paragraph 123 above). Secondly, Mr Deir's own case is that there came a time when his right, as he saw it, to director's fees came to an end before he departed finally from LAA in September 2008: the table at paragraph 89 shows that in relation to Lydd Golf Ltd and Basil Property Companies (see paragraph 123 above) he was not seeking fees beyond a certain date. (I should say that that is how I have interpreted the position also in relation to Lydd Golf Ltd. Mr Hill-Smith has said that this company was dissolved on 21 May 2008 so that this date, he submits, is the "cut off date". I do not doubt that the date of dissolution was as he has suggested, but "dissolution" implies a formal end to the life of a company, not necessarily the cessation of trading which may be earlier. Accordingly, the date set out in the table at paragraph 89 seems to me to be the appropriate date in the absence of other evidence of which there is none.)
Given the apparent potential for endless disputation in this case, I set out below in tabular form the companies in respect of which, on the basis of this judgment, Mr Deir is entitled to director's fees and the periods of time concerned:
COMPANY |
PERIOD |
PARAGRAPH(S) IN JUDGMENT |
FAL Aviation UK Ltd |
11/12/2004 - 26/09/08 |
65-66, 89 and 123 |
Phoenix Aero Engineering Ltd |
10/ 01/2007 - 26/09/08 |
89 and 123 |
Lydd Air Show Ltd |
08/11/2005 - 08/11/07 |
89 and 124 |
Lydd Golf Club & Driving Range |
04/10/2005 - 27/11/07 |
89 |
Lydd Golf Club Ltd |
04/10/2005 - 30/11/2007 |
89 and 277 |
Basil Property Company SA Limited |
19/12/2006 - 31/08/2007 |
89 and 123 |
Barton House (No 41) Ltd |
11/12/04 - 26/09/08 |
123 |
As I have now said expressly in the main body of the judgment (see paragraph 125), the calculation should be on a pro rata daily basis. Again, I should have thought it obvious that what I had intended was that the re-calculation should be on a pro rata basis given that I spoke of "re-calculation" of the way the claim had been presented. What I had not made clear expressly was (a) the legal basis for that conclusion and (b) whether the pro rata basis was daily or monthly. I would not have seen that omission, or those omissions, on any view, as justifying an attempt to open up the argument that Mr Deir must have completed a whole year before any entitlement to director's fees arose. Mr Lewis, however, invites me at this stage to conclude that, on the pleaded case as it presently stands, the entitlement to director's fees should be in respect of completed years only. I can deal with the matter very shortly.
Mr Deir's pleaded case in relation to this issue was that -
"
it was an implied term as a matter of obviousness and/or business efficacy, that the figure of £20,000 would apply pro rata in respect of each directorship so entered into, so that the Claimant was not required to complete each calendar year to be entitled to the payment but would be paid, and is entitled to be paid, £1,666 per month for each directorship undertaken".
For my part, I would have regarded the basis of payment under the oral agreement made between the Sheikh and Mr Deir in December 2003 as obvious without the need for it to be expressed: see paragraph 13-007, Chitty on Contracts, 30th edition. If the proverbial "officious bystander" had said "Do you mean that Mr Deir must complete 365 days as a director before any part of the £20,000 is paid for that year and that if he completes only 364 days he will get nothing?", to my mind the testy response of both the Sheikh and Mr Deir would be "of course not". I do not see this as an implied term in the Moorcock sense: an agreement of the nature that Mr Lewis suggests could have been made and could have been given legal effect as the intended commercial purpose. However, any court would strain to find to the contrary for all the obvious reasons of fairness. As I have said, I consider that this issue can be dealt with in terms of the obvious inference from the agreement.
If I am wrong about this, I would have said that the Apportionment Act 1870 could be relied upon to remedy what would otherwise be an obvious injustice. Section 2 provides that "all rents, annuities, dividends and other periodical payments in the nature of income ... shall, like interest on money lent, be considered as accruing from day to day, and shall be apportionable in respect of time accordingly."
Mr Lewis has made much of the fact that the Act had not been relied upon at any stage before Mr Hill-Smith raised it in his additional representations following the sending of the draft judgement of the parties and that reliance upon it had never been pleaded. Mr Hill-Smith says that because it is a matter of law, reliance on the Act does not have to be pleaded. I think that is probably right, but if I am wrong about it, I would have unhesitatingly granted permission to amend the pleadings to incorporate reference to it because no prejudice could possibly have been caused to the Sheikh as a result. It would, as I have indicated, have enabled a clear injustice to be remedied.
The Apportionment Act would also have given legal authority for concluding that the periodic basis should be daily. Had it not been so, I would have concluded that it should have been on that basis in any event: it would be just as unfair to say that someone who has completed 28 days work should receive nothing for the work done in that month as it would be to say that someone who had completed 364 days work in a year should receive nothing for that year unless the express terms of the agreement demonstrate so clearly to the contrary.
I turn finally to the contention of Mr Lewis that raising the issue of "active management" in the context of the claim for director's fees has caused prejudice to the Sheikh because the matter had not previously been identified, no evidence in relation to the issue has been called and he has been denied the opportunity of presenting relevant evidence. If this matter goes elsewhere, it will be for others to judge whether there is any substance in that contention. I can deal with the matter very shortly.
First, it is a commonplace in all forms of litigation that the court may, if the evidence and argument justifies it, reach a position which lies somewhere between the extremes taken by the parties. In a sense, that is what I have done in relation to the issue of director's fees in this case. I have taken on board some of the arguments put forward on behalf of the Sheikh in determining how the agreement that I have found was concluded should be interpreted. Equally, I have rejected some aspects of the way in which the argument has been addressed on behalf of Mr Deir. However, I have rejected the principal contention on behalf of the Sheikh that there was no agreement at all and that it was a fiction dreamt up by Mr Deir. Given that that was the position taken on the Sheikh's behalf, it does seem to me to be somewhat fanciful to suggest that an alternative case based on whether "active management" as I have defined it (see paragraph 270) would have been addressed with any enthusiasm. Nonetheless, and this is the second point I would make, Mr Deir, whilst not advancing his case on the basis of the need for "active management", did put forward evidence from which management of that nature could be seen to have occurred: see paragraph 277 above. That evidence was there to be challenged in order to demonstrate the absurdity (as it would be contended that it was) of an agreement such as the one made. Indeed my notes of the cross-examination of Mr Deir (supported by those of Miss Betts) indicate that he was asked about what he did for several of the companies that underlie the claim for director's fees.
Thirdly, in a case where, frankly, no stone was left unturned in seeking to undermine anything said or done by Mr Deir, it is very difficult to accept that consideration was not given to suggesting that what Mr Deir was claiming he had done in return for the director's fees was so inconsequential as to make the claim preposterous. However, what must not be forgotten is that my conclusion about the rationale for this agreement was that it represented something of a makeweight for the rather low salary that Mr Deir was to be paid for his work at the airport. Over-exacting standards of work for any of these companies would not be consistent with that rationale: Mr Deir's principal work in the UK related to Lydd Airport.
Finally, it has been necessary to keep a sense of proportion about how much time and expenditure is incurred in litigating some of the issues in this case. A quest for a detailed account of Mr Deir's "active management" (and any relevant disclosure) in each of these companies would probably have generated more heat than light - and considerable expenditure in costs. To that extent, I can see nothing unjust (or contrary to the Overriding Objective) in dealing with matters in a relatively robust way on the material before the court.
Final conclusion
This judgment now represents my final word on this case. I will deal with any consequential matters on the basis of written representations about which I will give further directions if necessary.