Tigris International N.v v China Southern Airlines Company Ltd and Anr
| Jurisdiction | England & Wales |
| Judge | Lord Justice Christopher Clarke,Sir Colin Rimer,Lord Justice Lewison |
| Judgment Date | 17 December 2014 |
| Neutral Citation | [2014] EWCA Civ 1649 |
| Docket Number | Case No: A3/2013/2328 |
| Court | Court of Appeal (Civil Division) |
| Date | 17 December 2014 |
[2014] EWCA Civ 1649
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION
COMMERCIAL COURT
MR JUSTICE SIMON
[2013] EWHC 2211 (Comm)
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Lewison
Lord Justice Christopher Clarke
and
Sir Colin Rimer
Case No: A3/2013/2328
Hugo Page QC (instructed by Watling & Co) for the Appellant
Bankim Thanki QC and David Murray (instructed by DLA Piper UK LLP) for the Respondent
Hearing dates: 23 rd and 24 th July 2014
Tigris International NV ("Tigris"), the appellant, claims damages against China Southern Airlines Co Ltd (" CSA"), the first respondent, and the return of the deposit paid under an agreement for the purchase of six aircraft. On 25 July 2013 Simon J dismissed those claims and awarded CSA $ 37,400,000 on its counterclaim. The question in this appeal is whether he was right to do so.
The parties and those associated with them
Tigris is incorporated in Curaçao. It was in 2009 the joint venture vehicle of Mr Rutger Koolhaas, who is Dutch, and Mr Bijan Pakdaman, who is of Iranian extraction. These two individuals fell out spectacularly during the course of the venture. Tigris had, as the judge put it, " no market history, no assets, no financial resources of its own and no published accounts". Mr Koolhaas was, but Mr Pakdaman was not, a director of Tigris.
Mr Herman Venter ("Mr Venter") is a very experienced mechanic with an FAA licence and an Inspector's Authorisation Licence. In early 2009 Mr Koolhaas and Mr Pakdaman agreed with him that he would represent Tigris in all technical matters relating to the sale and purchase of aircraft and in return would receive a 20% share of net profits.
CSA is the sixth largest airline in the world in terms of the size of its fleet. It operates scheduled flights worldwide. Its headquarters are in Guangzhou. At the relevant time Mr Su Liang ("Mr Su") was its Chief Economist and Dr Zhong Cheng ("Dr Zhong"), sometimes referred to as Brown Zhong, was a Project Manager within its Planning and Development Department.
GALink Aviation Technology Co Ltd ("GALink"), the second defendant, acts as a broker. Its principal representatives were Hawk Yang ("Mr Yang") and Jim Smith ("Mr Smith"). Tigris obtained a default judgment against it on 28 September 2011 but has not recovered anything thereunder. It was essentially a middleman, mainly concerned with promoting its own commercial interests. The judge said [75] that he would treat with caution any assertion made by it as to what other parties had said or done or intended.
Mr Koolhaas and Mr Pakdaman's business plan was to buy aircraft from China and sell them in Iran. This was, as the judge put it, " a delicate commercial transaction". Iran was subject to UN sanctions and Tigris lacked any commercial or financial substance. Tigris knew that CSA would not be willing to sell aircraft whose ultimate destination was Iran. The judge found [70] that, whatever might have been their suspicions by the end of the contract, neither Mr Su nor Dr Zhong knew that the aircraft were ultimately destined for an Iranian airline.
Since Tigris, itself, had no way of fulfilling its obligations under any aircraft purchase the success of the venture depended on securing, through Mr Pakdaman's contacts, back-to-back contracts so that the deposit and the balance of the purchase price paid by Tigris to CSA would be funded by the sub-purchasers from it. In broad terms it was agreed between Mr Koolhaas and Mr Pakdaman that Mr Koolhaas would be responsible for the purchase of the aircraft and Mr Pakdaman would be responsible for sales in Iran. Mr Venter would deal with the technical aspects of the venture.
Tigris' principal claim was that at one or more of various meetings in 2009 in Beijing, Shanghai and Johannesburg, unlawfully and in breach of the agreement for the sale of the aircraft, and knowing that it was a breach of Mr Pakdaman and Mr Venter's duties to Tigris, CSA, GALink and Messrs Pakdaman and Venter entered into a secret agreement, concealed from Koolhaas and Tigris, that CSA and GALink would divert the sale contracts for 5 of the 6 aircraft, engines and spares from Tigris to a company or companies set up, or to be set up, by Mr Pakdaman and Mr Venter with the benefit being shared between the defendants; Re-Amended Paritculars of Claim ("RAPOC") para 15.
Mr Pakdaman's status in relation to Tigris
On 24 June 2007 Mr Koolhaas, Mr Pakdaman and a Dr Folkers entered into a Cooperation Agreement. This was the only document relied on in Tigris' pleadings as conferring any authority on Mr Pakdaman in relation to Tigris. Dr Folkers, a lawyer, resigned from the arrangement in early 2008. The agreement is expressed to be between those three individuals. Mr Koolhaas, the Second Party, is expressed to be acting " in his own name for and on behalf of the companies he owns such as but not limited to Tigris". It recites Mr Koolhaas' wish to seek the advice of Mr Pakdaman and Dr Folkers to develop business opportunities for his companies on the territory of Iran and Kurdistan.
By the Agreement Mr Pakdaman was appointed as:
" 1 ….the Exclusive Agent for the Second Party. This means that the First Party [i.e. Mr Pakdaman] has the right to represent the Second Party towards any Government Entity or third party to the best interests of the second Party. Moreover the Agent is authorised to negotiate contracts subject to written approval of the second Party. Under no circumstance the Agent can legally bind the Second Party without his written consent…. The second party will not conclude any contract in Iran and Kurdistan without specific consent of the first party"
As is apparent both the negotiation of contracts and the making of them required Mr Koolhaas' consent. Clause 3 provided that the parties were to cooperate " to obtain and execute contracts in Iran". Clause 4 provided that the profits would be shared equally between the three.
Simon J held that it was unclear what authority Mr Koolhaas had to contract on Tigris' behalf on this date because he was not a director of it: [85]. He was, however, the sole shareholder. There had also been disclosed by Tigris a letter dated 5 April 2006, which was not in the trial bundles, by which Mr Witteveen, the then managing director of Tigris, gave Mr Koolhaas full unlimited power of attorney to represent Tigris. CSA did not object to the admission of this evidence before us and was content to proceed on the basis that Tigris was a party to the Cooperation Agreement.
On 19 December 2007 Mr Koolhaas and Mr Pakdaman were given very wide powers of administration and disposition by Tigris, including the ability to enter into contracts, so that they could represent it " jointly". By now Mr Koolhaas was a 51% and Mr Pakdaman a 49% shareholder; Mr Koolhaas was President and Mr Pakdaman secretary. This was the authority in existence when the project with CSA first started.
In August 2009 there were further developments in relation to Mr Pakdaman's authority: see [30] below.
The history
It is necessary to address the history of events in some detail. What follows is, in large measure, derived from the judgment of the learned judge. But it also incorporates reference to communications which the Appellants say that the judge should have taken into account but did not.
In July 2008 CSA advertised for sale the aircraft, engines and spare parts that form the subject matter of this appeal, which were redundant from its fleet.
On 15 January 2009 Mr Koolhaas for Tigris and Mr Yang of GALink entered into a Letter of Intent for the purchase by Tigris of 6 Airbus 300–600R aircraft identified as MSN 733, 734, 739, 750, 756 and 762 with an associated package of engines and spares for a total price of US $ 160 million.
Tigris' sale contract with Oghab
On 1 February 2009 Tigris signed an agreement to sell aircraft MSN 750, 756 and 762 to an Iranian airline — Oghab Assaluyeh ("Oghab") — at a price of $ 27.5 million each with the buyer contracting to pay a deposit of $ 9 million and a balance of $ 24.5 million per aircraft. The purchase of these aircraft by Tigris was initially intended to be through GALink. On 13 May Oghab released € 6.16 million to Tigris and Tigris paid $ 8.25 m to GALink. Subsequently the sale was restructured and Tigris entered into a direct contractual relationship with CSA.
Letter of Intent No 1
On 22 May 2009 CSA, Tigris, and GALink executed a Letter of Intent ("LOI No 1") for the sale by CSA of the 6 Airbus 300–600R aircraft with the MSNs specified in [16] above and five spare engines for $ 124 million. Tigris was required to pay CSA a non-refundable security deposit of $ 12.4 million within 10 business days of the signing and to make a payment of $ 57 million before delivery of the first aircraft. On 26 May 2009 Tigris and GALink signed an agreement confining the scope of GALink's relationship with Tigris to the sale of the spare parts for $ 20 million.
On 5 June 2009 Tigris made a payment to CSA of $ 6.2 million and on 30 June 2009 a further payment of $ 4,677,697.92, making $ 10,877,697.92 in all towards the deposit, leaving a shortfall of $ 1,522,302.08. Tigris did so having received € 17.5 million (c $ 24.5 million) from Oghab, being the balance for the first aircraft.
Even at this early stage the breakdown in trust between Mr Koolhaas and Mr Pakdaman had begun. On 8 June 2009 Mr Pakdaman sent...
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