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West Coast Air Limited v. Gambia Civil Aviation Authority and Others (The Gambia) [1998] UKPC 39 (15th September, 1998)
Privy Council Appeal No. 64
of 1997
West Coast
Air Limited Appellant
v.
(1) Gambia Civil Aviation Authority and
(2)
Attorney General Respondent
FROM
THE COURT OF APPEAL OF THE GAMBIA
---------------
REASONS
FOR DECISION OF
THE LORDS
OF THE JUDICIAL
COMMITTEE OF THE
PRIVY COUNCIL
OF THE 30th July 1998,
Delivered the 15th September 1998
------------------
Present at the hearing:-
Lord Slynn of Hadley
Lord Steyn
Lord Cooke of
Thorndon
Lord Clyde
Sir Christopher
Slade
·[Delivered by Lord Cooke
of Thorndon]
------------------
1. On
30th July 1998 their Lordships announced their decision that the appeal should
be allowed and directed that judgment be entered for the plaintiff in the
Supreme Court against the defendants jointly and severally for US$654,654.69
with interest at ten per cent per annum from the date of the writ as claimed
(17th November 1993). The interest rate
was that adopted by the Court of Appeal.
The respondents must pay the appellant’s costs before the Board and in
the courts below. Their Lordships were
to deliver their reasons later, as they now do.
2. This
case is the aftermath of a defeated attempt to establish an air service in The
Gambia. Mr. Mario Tosti, an Italian
citizen, was minded to start a business there to provide domestic services
within the country and regional services to other West African countries and
possibly as far afield as Europe. With
the initial encouragement and cooperation of the Gambian authorities, he made
for a time progress to that end, incurring much expenditure; but, for reasons
which have never been satisfactorily explained, the Government agencies turned
against him and ultimately he was forced to abandon the project.
3. The
company which he had formed for the project, West Coast Air Limited, brought a
claim in the Supreme Court of The Gambia for US$1 million damages. In a judgment delivered on 14th March 1996
the trial judge (Adio J.) found for the plaintiff, awarding US$500,000 with
costs and interest. On appeals by both
sides, however, the Court of Appeal (Chomba S.C., President, Ofori-Boateng and
Lartey JJ.A.) on 26th June 1997 varied that decision by remitting the
assessment of damages, on a more
restricted basis, to the Supreme Court.
With the leave of the Court of Appeal the company now appeals to the
Judicial Committee of the Privy Council.
4. The
material events occurred between 1991 and 1993. It should therefore be noted that the defaults on the part of the
administration of The Gambia were before the coup d’etat of 1994 and the
establishment of the second republic in 1997.
The present administration has inherited the liabilities of its
predecessors.
5. The
tale is told largely by three letters which their Lordships will reproduce in
full with some linking narrative.
6. Mr.
Tosti went to The Gambia in late 1991.
He laid his proposal before Mr. B.A. Jallow, then Director of Air
Navigation Services of The Gambia Civil Aviation Authority, a corporation
wholly owned by the Government, whose functions include organising, carrying
out and encouraging measures for the development of aviation in The Gambia. Mr. Tosti was given to understand that his
proposal accorded with Government policy and that he should incorporate a
company in The Gambia and submit feasibility studies. These things Mr. Tosti
did, and other preliminary activities followed. On 20th January 1992, on behalf of the Authority, Mr. Jallow
wrote the first of the three key letters to Mr. Tosti:-
“APPLICATION
FOR AIR SERVICE LICENCE - WEST COAST AIR
7. I
refer to your letter dated 3rd January 1992 on the above captioned subject
matter.
1.Your
proposal to establish a regional and domestic air carrier in The Gambia is
viewed with great interest and has the unreserved support of The Gambia Civil
Aviation Authority.
2.It
is regrettable that your company cannot be designated to operate scheduled
services to Dakar, Nouakchott and Bissau since Gambia Airways have already been
designated to operate all the frequencies available under the respective Air
Service Agreements between The Gambia and the relevant states. It is however possible for West Coast Air to
be designated to operate schedule services from Banjul to Conakry and
Bamako. In the case of Cape Verde, an
Air Services Agreement has yet to be concluded.
3.This
administration has no objection to issuing an Air Service Licence to West Coast
Air to operate a domestic Air Service on condition that the company undertakes
to construct and equip the airstrips at the locations mentioned in your
proposal, to a standard acceptable to the Civil Aviation Authority in terms of
safety.
4.The
issue of a Development Certificate and the associated duty-free facility is not
under the jurisdiction of this office but nevertheless it is almost certain
that, this being the first project of its kind to be launched in this country
due consideration will be given to your request by the appropriate authority,
taking into consideration the substantial financial outlay involved and its
contribution to the national bid to improve communication between the urban and
the rural areas. In any case, this office
will give its full support to any application submitted by your company on the
subject, since the provision of a Servicing and Hangar facility is one of the
major items on the Banjul International Airport Masterplan.
5.Finally,
there being hardly any restrictions on non-scheduled and charter operations,
this office would strongly advise you to explore the possibility of
non-scheduled operations where there is no possibility of a designation to
operate scheduled services. This can be
applicable to both passenger and cargo traffic. Tourist traffic, though
seasonal, also offers good opportunities for charter operations.
6.You
will find enclosed two copies of CAA Form No 1, which you are to complete and
submit to this office together with the following documents for each aircraft:-
(i)Certificate
of Registration
(ii)Certificate
of Airworthiness
(iii)Certificate
of Insurance.
8. Please
do not hesitate to contact this office for any further information.
B
A JALLOW
for
DIRECTOR GENERAL”
9. Thereafter
Mr. Tosti was active in many ways. For
example, the company leased and brought to The Gambia a new 17-seater AN 28
aircraft, manufactured in Poland, suitable for short runways. It had pilots trained in Poland and brought
them and mechanics to The Gambia. It
prepared the site for a hangar at Yundum airport near Banjul, the capital of
the state. When that site was taken
over by the fire brigade, the company constructed a temporary shelter for the aircraft instead. It imported spare parts and arranged for maintenance. It arranged for fuel supplies and ticket
sales, and it promoted the project with tour operators and by newspaper
advertising. It obtained the necessary
certificates for the pilots and the plane.
Various test flights were undertaken.
Of particular importance, the company prepared an airstrip at the inland
town of Basse. All this and more was
done with official support.
10. On
27th June 1992 an official party was carried on the plane from Banjul to Basse
for what was described as the maiden flight.
Before the take-off the Minister of Tourism, according to a newspaper
report, “thanked West Coast Air and pledged Government’s support to the
company”. The report also recorded
that, speaking to a large crowd at the Basse airstrip, the Parliamentary Secretary
at the President’s Office, deputising for Vice-President Sabally, urged local
businessmen to take advantage of the service and thanked West Coast Air on
behalf of the Government. The
Commissioner of the Upper River Division and local Chiefs also joined in the
mutual congratulations.
11. At
that stage the company had a licence for a scheduled domestic air service on
the route Banjul/Basse/Farafenni/Georgetown/Banjul for the period from 23rd
April 1992 to 22nd April 1993. It was
issued by the Minister of Works and Communications on 23rd April 1992, under
the letterhead of The Gambia Civil Aviation Authority. Certain conditions of a
straightforward nature were set out and it was expressly stipulated that the
Minister reserved the right to withdraw the licence if these conditions were
infringed. Their Lordships note that no
other right to withdraw the licence was reserved. As for the geography of the route, Banjul is on the coast; the
state of The Gambia is a relatively narrow corridor of land (much of it only 24
kilometres wide) extending inland for some 470 kilometres along the valley of
The Gambia river and surrounded on all landward sides by Senegal; Basse is near
the south-eastern corner of The Gambia; Farafenni and Georgetown are other
inland towns.
12. Some
preliminary external flights were also undertaken. On at least one of these Mr. Jallow accompanied Mr. Tosti. On 3rd July 1992 the Minister signed two
licences for the company for external services during the period from 1st July
1992 to 30th June 1993. One was for a scheduled regional service
Banjul/Dakar/Conakry/Bamako/Austria/Belgium/Banjul.
13. Dakar
is a port in Senegal, to the north of The Gambia. Conakry is a port in Guinea,
to the south. Bamako is in Mali, to the
east. The other licence was for a
non-scheduled service Banjul/Praia/Dakar/Bissau/Mauritania. Praia is in the
islands Republic of Cape Verde; Bissau is a port in Guinea Bissau, a small
coastal country lying between southern Senegal and Guinea; Mauritania is to the
north of Senegal and Mali. These
licences specified conditions and a right of withdrawal for breach in terms
similar to those of the domestic licences.
Unfortunately the regional licences were posted to the company at a post
office box which it ceased to use. It
did not actually receive them until December 1992. But nothing turns on that, for their Lordships accept that the
regional licences were of no practical use to the company without formal
designation by the issuing Government and approval by the Government of the
host country. No such designations or approvals
were ever forthcoming.
14. The
aura of enthusiasm was soon dispelled.
On 13th July 1992 the second of the three key letters was sent to the
company:-
“TERMINATION
OF BANJUL/BASSE DOMESTIC AIR SERVICE WEST COAST AIR
15. I
have been directed to instruct you to terminate your services between Banjul
and Basse with immediate effect, until adequate facilities are provided for the
security forces at the Basse airstrip.
16. This
office will inform you of any future developments concerning this matter.
B
A JALLOW
for
Director General”
17. That
letter, evidently quite unheralded, marked the beginning of a long phase of
official non cooperation with and hostility to the company. Between then and June 1993 Mr. Tosti made
many attempts by letters and personal approaches to obtain explanations of this
change in attitude and to rescue or advance the project. He could not understand the objection about
security: police, customs and national security personnel appeared to be
conveniently on hand at Basse. The
subject had not been raised at all before the July letter. He thought that “someone was looking for
money”. He obtained some interviews,
including one with the Vice-President, but no satisfaction. His company was not formally designated by
the Government for regional services, nor on the evidence was any serious
attempt made by the Government to obtain the approval of other
Governments. The company’s applications
for temporary residential and work permits in The Gambia were refused. The necessary radio frequencies were not
allotted. The dominant tone of the
response accorded to Mr. Tosti is sufficiently conveyed by the third letter,
which was from Mr. P.J. Jarjussey and was widely distributed within the
bureaucracy by its author:-
“24th
December 1992
WEST
COAST AIR
18. I
wish to acknowledge receipt of your letter dated 18th December, 1992 which was
addressed to His Excellency the Vice President and copied to me, among
others, concerning the above noted
subject in which you stated as follows: ‘Today the undersigned meeting the
Permanent Secretary of the Ministry of Works, has been told that our
designations are upheld pending clarification of our Company’s staff
Immigration status.’ and to inform you that I neither had any such meeting with
you to discuss this issue nor made the statement you ascribed to me to warrant
the arbitrary assertion and claim you made in your letter under reference and
cited above herein. All that transpired
was when you hurriedly called on me without notice, (and at one stage remained
on your feet even though I had invited you to remain seated) I did inform you
that your application for designation will be considered within the context and
framework of the Government’s broad policies and regulations governing Civil
Aviation and the status of companies and their staff, among other factors.
19. I
would therefore like to take this opportunity to state categorically and most
unequivocally, if for nothing else but at least for the records and for future
reference, that you kept on abruptly calling on the Assistant Secretary at the
Ministry without notice. When you attempted to see me in my office through him,
his efforts proved futile as I was in the middle of previously scheduled
meetings. When I eventually received
you, (again without notice) it was at great administrative cost to me
because I had to cut - short another scheduled meeting to accommodate you. My immediate advice to you was to request
you to notify us of your visits in future so that you will not have to wait for
long periods or go away without access to me, if, as it appeared to be the
case, you were not satisfied with discussing with one of my collaborators who
would have reported to me and make recommendations, on the basis of which a
decision will be taken, either way.
This is why I emphasised to you during your brief appearance in my
office - which you chose to call a meeting whose outcome incidentally was the
one sentence cited in your letter under reference - that even though this is a
public office and we are open to everybody and remain flexible, we also wish to
conduct our work in a planned, orderly and co-ordinated manner.
PHODAY
SAIKOUBA JARJUSSEY
PERMANENT
SECRETARY
CC: Secretary General & Head of The Civil
Service
Commander
Commander
Chairman
Chairman
47. It
emerged from the defence evidence at the trial that on 9th December 1992,
unbeknownst to the company, a meeting of officials had been held under the
chairmanship of Mr. Jarjussey “to look into the circumstances surrounding the
termination of West Coast Air’s Domestic Operation”. The minutes, prepared by Mr. Jallow, record that the chairman
told the meeting that from the onset he had objected to the development of the
Basse airstrip. As he regarded the
company’s staff as staying in the country illegally, he recommended that its
air services licences be suspended. “He
went on to warn the meeting to be wary of foreigners who come to this country
to set up airline companies and acquire licences just to wind up after a short
spell”. The Director of Immigration was
among those who lent support at the meeting to Mr. Jarjussey: he spoke of
requiring the company, inter alia, to prove that it had invested more than $1
million in The Gambia.
48. What
led to the sea change of attitude their Lordships are in no position to
determine. The trial judge appears to
have gone as far as to describe the security reason as a hoax. In the minutes of the December meeting there
is a reference on the subject of security to a letter of 8th July 1992 on
behalf of the Secretary-General; and at the trial one of the only two defence
witnesses, Mr. B.A. Foon, spoke of a directive from the President’s
Office. No such letter or document was
produced at the trial, however, nor was there any oral evidence, or even an
affidavit or certificate, to give plausibility to the suggestion that security
considerations truly arose. Indeed the other defence witness, Mr. Jallow, said
that to him it appeared that no security was involved.
49. Eventually,
by letter dated 7th June 1993 to the Director General of the Authority, with
copies to the President of the Republic and the Minister of Works and
Communications, West Coast Air gave notice that the total failure of its
programme had been forced upon it, and of a claim to compensation. In substance the letter terminated the
relationship on the ground of repudiation by the defendants. The writ followed on 17th November 1993, and
shortly thereafter a statement of claim.
These documents deployed a somewhat indiscriminate range of charges
against the defendants, including negligence, breach of contract and
misrepresentation. The Authority was
named as the first defendant; the Attorney General, representing the Minister
of Works and Communications, as second defendant.
50. The
trial proceeded intermittently from 1st November 1994 until 6th December
1995. The judge found a contractual
relationship by conduct or estoppel; also negligent misstatement. He awarded the plaintiff US$500,000 for what
was described in the judgment as general damages but was intended to be a
global estimate of the plaintiff’s losses by way principally of wasted
expenditure. One of the contentions for
the defendants at the trial was that there had never been a contract. In the Court of Appeal, however, the
defendants abandoned that contention.
In additional grounds of appeal they apparently accepted that there was
one “whole” contract, applying to both domestic and regional services, but
alleged that the termination of the Banjul/Basse route was not termination of
this whole contract. The new contention
was accepted by the Court of Appeal in a judgment delivered by Chomba P. The court held that the aviation contract
was not one entire indivisible contract but was divisible and severable. They set aside the judge’s award and
remitted the case to the Supreme Court so that the Master could assess which of
the expenses claimed related to the domestic service. Only for those were damages to be awarded. On the appeal to their Lordships the same
position was adopted by the respondents, the main arguments for them being that
damages should be assessed for breach of the domestic part of the contract
only. It was also argued that the
plaintiff was the author of its own losses or had failed to mitigate the
damages.
51. A
class of cases which quite commonly come before the courts in various forms
consists of those in which parties join in some common venture or activity
requiring cooperation but, after preliminary expenditure has reasonably been
incurred by one party on the faith of the arrangements, the other becomes
unwilling to proceed further.
Arrangements for Government concessions can be a species of this genus. The disappointed party may have to accept
the consequences of taking the risk, but the common law does offer several
possible ways of fulfilling reasonable expectations by recognising a right to
monetary compensation. For instance it
may be possible to see the dealings of the parties as giving rise to an implied
contract or a duty of care in tort. In
the present case it becomes unnecessary to consider tort. The courts below
found a contract without identifying with any precision how it was made or what
were its terms. Their Lordships agree that the dealings can properly and
realistically be analysed as creating a contract. The letter of 20th January 1992, together with the surrounding
circumstances, evidences a contract by words and conduct between the company
and the Authority whereby, in return for an obligation by the company to take
all reasonable steps to provide a regional and domestic air service, the
Authority promised unreserved support.
The Authority’s promise was express.
It constituted acceptance of the kind of duty existing when parties
agree to do something which cannot effectually be done without cooperation: see
Mackay v. Dick (1881) 6 AppCas 251, 263 per Lord Blackburn. In the circumstances the applications for
and granting of the licences brought the Minister directly into the contractual
relationship, which thus became a tripartite agreement to cooperate in all
reasonable ways to establish the airline.
52. The
description “entire contract” is not a particularly helpful one in this
context. Traditionally that label is
applied to contracts where completion of one party’s performance is a condition
precedent to the other party’s liability to pay. That is not this case.
The contract was for both regional and domestic services, but the
suggested severability or divisibility is unsupported by the evidence. The company planned to provide these services
with a single aircraft and as an integrated operation. The expenditure claimed, extensive
particulars of which were given in evidence, was not broken down as between
domestic and regional services. Most of it could not be so broken down. It was not put to Mr. Tosti in
cross-examination that the regional services on their own would be economically
feasible without a complementary domestic service, nor is there anything to
suggest that this was at all likely. From
the first, services operated in combination were what was contemplated on both
sides. The severability argument, not
raised at the trial or in the initial grounds of appeal, appears to have been
an afterthought. While appreciating
that the Court of Appeal found it attractive, their Lordships are compelled to
regard it as lacking an evidential foundation.
53. While
various expressions are used in the authorities to denote the kind of conduct
by a party which will justify the other party in treating a contract as
repudiated for actual or anticipatory breach, the common principle is that, to
amount to repudiation, a breach must go to the root of the contract: see Federal
Commerce & Navigation Co. Ltd. v. Molena Alpha Inc. [1979] A.C. 757,
778-9 per Lord Wilberforce. The test is
normally the objective one of the effect of the conduct on a reasonable person
in the shoes of the other contracting party; but, if the evidence shows that
the conduct was inspired by the motive of putting an end to any relationship,
the court will be readier to find the test satisfied. In this case the curt letter of 13th July 1992 might well have
gone to the root of the contract.
Without some explanation it could itself have destroyed the company’s
faith in the willingness of the administration to continue to cooperate. It proved to be but the prelude to a long
course of frustrating official action and inaction. By June 1993 the company was certainly abundantly justified in
rescinding for repudiatory breach.
54. The
argument that the company’s losses were caused or contributed to by its own
culpable conduct is equally untenable.
There is no evidence of any significant default or failure to mitigate
on the part of the company. On the contrary it acted reasonably in trying to
preserve the contractual relationship as long as possible.
55. The
company is therefore entitled to a full award of damages for reliance
losses. Mr. Causer, who argued the case
for the respondents with clarity and candour, had to accept that the damages
claimed for such losses were properly established by the sworn
particulars. There is no need for any
further inquiry or assessment.
© CROWN COPYRIGHT as at the date of judgment.
© 1998 Crown Copyright