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	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Aerostar Maintenance International Ltd & Anor v Wilson & Ors [2012] EWHC 1353 (Ch) (04 May 2012) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2012/1353.html Cite as: [2012] EWHC 1353 (Ch)

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IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Court 14

		7 Rolls Building Fetter Lane London EC4A 1NL
		4 May 2012

MR JUSTICE MORGAN:

1. On 30 July 2010 I gave judgment on liability in this action. The neutral citation of that judgment is [2010] EWHC 2003 (Ch). That judgment dealt with two different claims, or sets of claims. I described them in the judgment as the main claims and the Globespan claims. The Globespan claims were dismissed. As to the main claims, the result of my judgment was reflected in the order made on 30 July 2010. In paragraph 1 of that order it was held that the first defendant was liable to the first claimant for breach of its fiduciary duties, and the first claimant was to be at liberty to elect, as against the first defendant, between (1) an account of profits which the first defendant had made by reason of his breach of fiduciary duties, and (2) equitable compensation for losses incurred by the first claimant by reason of the first defendant's breach of fiduciary duties.
2. Paragraph 2 of the order was in these terms. The first defendant was further liable to the first claimant for breach of contract. The first claimant was entitled to an inquiry as to what damages the first defendant ought to pay in respect of his breach of contract. Paragraphs 3 and 4 of the order related to the second defendant. Paragraph 3 provided:

"The second defendant is liable to the first claimant for dishonestly assisting the first defendant in his breach of his fiduciary duties, and the first claimant is to be at liberty to elect as against the second defendant between:

1. An account of profits which the second defendant has made by reason of his dishonest assistance, and

2. Equitable compensation for losses incurred by the first claimant by reason of the second defendant's dishonest assistance."

Paragraph 4 provided:

"The second defendant is further liable to the first claimant for inducing or procuring the first defendant's breach of contract, and further for conspiring with the first and third defendants to injure the first claimant by unlawful means, and the first claimant is entitled to an inquiry as to what damages the second defendant ought to pay in respect of his inducement or procurement of breach of contract, and/or his conspiracy injure."

3. Paragraphs 5 and 6 of the order dealt with the position of the third defendant. The orders made in relation to the third defendant (which I will not read out) were very much of the same kind as the orders to which I have referred in the case of the first and second defendants. However, since that order was made, the third defendant has gone into compulsory insolvent liquidation. The result is that this action has been stayed against the third defendant under section 130(2) of the Insolvency Act 1986. The claimants have not sought an order under that sub-section, that they be given permission to proceed against the third defendant, and I have not been asked to make an order of that kind. The claimants accept that the action remains stayed against the third defendant.
4. Returning to the order, paragraph 7, again reflecting what was said in the judgment that I delivered, was in these terms. In so far as the first claimant elected to claim equitable compensation under paragraphs 1, 3 or 5 of the order, and in relation to the inquiry as to damages under paragraphs 2, 4 and 6 of this order, such assessment and/or inquiry should proceed on the basis that the first claimant's loss was its 80 per cent likelihood of securing, in place of the third defendant, contracts which were entered into between the third defendant and Romaero SA, and between the third defendant and Galaxy Aviation Trade Company Limited, PL Aviation Limited and Romaero SA. The order went on to make detailed provision for disclosure to be given by the defendants, and for a time period within which the first claimant was to make up its mind and to elect between an account of profits or an assessment of equitable compensation. Disclosure was given, and the first claimant did elect. The election was in favour of equitable compensation. As a result, I am now asked at this hearing to determine the quantum of the equitable compensation payable by the first and second defendants pursuant to the order I have referred to, and the amount of the damages payable by the first and second defendants pursuant to that order.
5. The judgment which was delivered on 30 July 2010 contains a large number of findings of fact and the resolution of other points then in dispute. I will not attempt to go through the judgment identifying all of the points which have some relevance to the present quantum assessment exercise. I will however refer (without reading) to paragraphs 208 to 217 of that judgment where I discussed the question of equitable compensation and paragraphs 218 to 222 where I discussed the question of common law damages. I will attempt to apply what I then said to what has emerged at this further hearing into the assessment of quantum.
6. At this hearing some of the terms which I defined in the earlier judgment have been used slightly differently. In this present judgment I will refer to the first claimant either as 'AMIL' or as 'the claimant'. I will refer to the third defendant by the name which it later took of 'Avman'. The contract to which there are four parties I will refer to as the Galaxy contract, and the contract to which there are two parties I will refer to as the Romaero contract. However, that should not disguise the fact that Romaero was also a party to the Galaxy contract, and that is a matter of some significance when one tries to establish what were the rights and obligations under the Galaxy contract.
7. I will now attempt to describe the way in which the claimants put their case on this application for the assessment of equitable compensation and damages. There has been a very considerable amount of disclosure provided by the relevant defendants. That has led Mr Malizia, on behalf of the claimants, to calculate, based on disclosed invoices, the sums by way of revenue and the sums by way of costs which the claimants would have generated or incurred, as the case may be, if the contract had been secured by the claimants and then performed by the claimants. Mr Malizia is an accountant, and plainly well able to do the calculations on the basis of certain assumptions which he has stated.
8. To some extent his evidence is supported by an expert witness, a Mr Wilkes, who is also an accountant. I say 'to some extent'. There is no occasion when Mr Wilkes disagrees with Mr Malizia, but there are places where Mr Wilkes very fairly indicates that he is not himself able to offer an opinion on a matter which Mr Malizia has dealt with. As will be seen, Mr Wilkes' evidence is material to an issue before me as to the trading position and the resulting financial position of Avman and, in that respect, Mr Wilkes performs the role of essentially a forensic accountant.
9. Returning to Mr Malizia's claim, the claim is based on a number of assumptions. The first is that the contract in question related to 11 aircraft. As I will explain there were, in the background to this case, a total of 11 aircraft, 8 of them flew to Bucharest to the Romaero facility and were worked on by Romaero; another 3 flew to Indonesia and were worked on atthe Garuda facility. Mr Malizia's claim, as I have described, proceeds on the basis that all 11 of those aircraft were the subject of the relevant contract.
10. The second thing that Mr Malizia assumes is that the relevant contract did not provide for AMIL or Avman to share in the benefits from carrying out works on any aircraft engines. I think Mr Malizia understood that that point had been decided that way in my earlier judgment though, having been taken to what I then said, I do not believe that I did make any finding of that kind. At any rate, Mr Malizia does not seek to bring into the calculation revenues or costs in relation to work, actual or notional, on aircraft engines.
11. The third basis of Mr Malizia's claim is that he has allowed for a two year period within which revenues may be earned and costed might be borne. The detail of that calculation I will leave until later, but I think it is helpful to describe at this stage the basic steps in the make-up of the calculation. Mr Malizia has thought through the figures which are appropriate on the revenue side of the calculation. He has then separately provided for direct costs and overhead costs. Having calculated direct costs, he deducts those from revenue to give the gross margin and, having calculated the gross margin, he deducts overhead costs to arrive at a projected profit. He then applies a factor of 80 per cent for the reasons stated in the order to which I have referred, giving rise to a figure of equitable compensation or damages.
12. In many respects, Mr Malizia's figures are based upon what actually happened. For example, in relation to some of the most important figures as to the revenue by reference to man hours which were worked, and the most important costs by reference to man hours worked by Romaero , Mr Malizia bases himself on actual invoices. In relation to Garuda, the figures are not based on invoices, and my comment particularly applies to what happened at Romaero. So Mr Malizia has examined the invoices for the work at Romaero. There are invoices in two directions: there are invoices raised by Romaero which were to be paid by Avman, and invoices raised by Avman which were to be paid by Galaxy. So, to a large extent, insofar as the claim is based on actual invoices, it does reflect the real position as to how much work actually needed to be done, and what rates were charged for that work. However that is not the complete picture because, as Mr Malizia makes clear, there are places where he has to make assumptions about work being completed by Avman and therefore available to be performed by AMIL, but he explains those assumptions in his calculations.
13. There is one point of detail I will mention at this stage because it will become significant in due course. I have referred to invoices rendered by Romaero to Avman. Some of those invoices charged a man hour rate of $32, some of them charged a man hour rate of €32. Mr Malizia has based his calculations on those rates. He has therefore adopted the rate of €32 where it was charged by Romaero. Indeed, where he has done a notional assessment by reference to invoices that Romaero could have rendered, he has again, as appropriate, adopted a rate of €32.
14. There is a very lengthy schedule (schedule 2) which has the heading "Supply of Materials and Direct Costs". The figure for this is of the order of £5.3 million. That figure itself is perhaps not of great significance because, whilst Mr Malizia adds it in the revenue side of the balance, he deducts the very same figure as a direct cost. However, schedule 2 is relevant because it is the basis for a very detailed calculation in relation to what are called handling charges. Mr Malizia's figures explain in detail the (not always straightforward) calculations that had to be done in relation to handling charges. So that is what one gets from schedule 2.
15. Schedule 3 has the heading "Recharges", and I think I need not in the circumstances, there being no dispute, describe what that is about. Schedule 4 deals with additional costs; again there is no real dispute about that. I will leave schedule 7 (under the heading "Direct Costs") for a moment. That leaves schedules 5 and 6, which are five categories of overhead costs which have been calculated with apparent care by Mr Malizia, and happily there is no dispute about the calculations.
16. Schedule 7 was prepared to assess the commission which would have been paid (AMIL says) by AMIL to a Mr Ashfield who is the second defendant in this litigation. I will have to examine schedule 7 in detail in the course of this judgment. I have, by the end of the argument, been provided with two versions of schedule 7. One version is on the basis that Mr Ashfield was entitled to receive, and did receive, commission in accordance with an exchange of e-mails dated 20 February 2007. That is the revised schedule 7.
17. The schedule 7 put forward by AMIL and Mr Malizia is a reworking of the actual position. There is a very significant difference between the two schedules; I will give the figures straightaway. On the basis that Mr Ashfield received commission in accordance with express terms which had been agreed, the commission becomes £1,422,244 odd, whereas the schedule 7 which is used by the claimant AMIL to calculate its entitlement is not very short of a million pounds less than this - £487,151.
18. Described in that brief way, the various steps towards the calculation of projected profit, on AMIL's case is that the projected profit was £1,835,716, and 80 per cent of that is to be awarded, they say. AMIL has also helpfully dealt with the point that the Court might find that the profit in question is not the profit from maintaining 11 aircraft, including the 3 at Garuda, but only maintaining 8 aircraft. Plainly the figures for 8 aircraft are smaller than for 11, and the calculation put before me for 8 aircraft is a projected profit of £1,376,092. In that case it is said that 80 per cent of that figure should be awarded as compensation or damages.
19. I will need to examine the detail of these figures in due course, but first it is convenient to deal with an overarching submission made by Mr Ramsden of counsel on behalf of the first and second defendants. He says that it is completely unrealistic to project a profit for 8 aircraft at Romaero of £1.376 million in view of certain real facts which he says came about. He says when Avman performed this contract, it made a loss and went into insolvent liquidation. He says the simple truth is the contract was not profitable. He could say, in fact he did say, the defendants did AMIL a good turn by removing from it the burden of a loss making contract. In law that produces the result that AMIL cannot establish it suffered any loss of profits, and the compensation or damages should be assessed at nil. I should reach that conclusion without needing to work my way through Mr Malizia's notional calculations.
20. As I stated at an early point in this judgment, it is quite true that Avman went into insolvent liquidation. However, I believe there are two quite separate questions. The first is: was the contract profitable, the question I will have to address. The second is: how did Avman go about performing the contract, how did it go about recovering for itself all the revenues to which it was entitled, not sharing them with people to whom there was no entitlement or obligation, and how did Avman control its own internal financial affairs. Avman plainly did not end up solvent, but that does not of itself mean that the contract was not a profitable contract, particularly if run competently by someone in the position of AMIL or a competent Avman.
21. AMIL called Mr Wilkes (to whom I have referred) to examine the financial affairs of Avman, to explore this question as to whether the fate of Avman was in any way revealing as to the profitability of the Galaxy contract. That is dealt with in paragraph B35 of Mr Wilkes' report. He referred to five matters in particular which were harmful to the financial position of Avman but which Mr Wilkes would say do not themselves indicate a lack of profitability in the underlying contract. The five matters were as follows.
22. The first was that Avman did not recover from Galaxy a sum of money which Avman stated was due from Galaxy. The sum was a substantial one of £930,000. The second matter which Mr Wilkes refers to relates to the three Garuda aircraft. I can put that on one side because the examination I am principally focusing upon at this stage is the difference between Mr Malizia's projection of profits for 8 aircraft and Avman's financial position having been involved with the work on 8 aircraft.
23. Mr Wilkes' third category relates to overheads incurred by Avman which would not have applied to AMIL. His fourth category is the inclusion of costs borne by Avman which were not related, he says, to the Galaxy contract. Finally, Mr Wilkes says that there is no evidence of Avman being paid handling fees to which they were entitled, he says, under the terms of the Galaxy contract, and which are indeed claimed by AMIL in the claim form to which I have referred, the handling charges being about quarter of a million pounds.
24. Mr Wilkes does not stop there. He has presented in appendix 4 a set of calculations which moves from an actual profit figure earned by Avman to the amount of the claim put forward by AMIL. Again, the AMIL figure he takes is not the figure for 8 aircraft but for 11 aircraft, but that is one of the steps to move from the Avman profit to the AMIL notional profit. I do not believe it is necessary for me to discuss each and every one of the figures in Mr Wilkes' calculations; they were not the subject of adverse comment in submission, nor were they subject of any detailed cross-examination.
25. One of the things which impacted on Avman was the legal fees involved in this dispute, and plainly that has no significance in computing the profitability of the underlying contract. Another figure which Mr Wilkes refers to is what he calls 'Iranian marketing', which seems to be a euphemism for something which I will not myself describe, but that is his term. He gives the figure of £74,000 odd. It may well be that that is a considerable understatement of the position under that heading. I think it is worth singling out that matter and commenting upon it.
26. To do so I go to a document which has a date expressed this way: dated as of 1 March 2007. It was plainly a document created long after that date and, on the balance of probability, it was created after Avman and Mr Wilson, and Mr Ashfield indeed, knew that they were in the firing line for the claims that were later made, and which even later succeeded. The document in question identifies the fact that there is a margin between the man hour rate payable by Avman to Romaero and the man hour rate chargeable by Avman to Galaxy. Expressing that margin in dollars, it is a margin between $32 payable to Romaero and $65 payable by Galaxy; a margin of $33. On the arrangements which existed prior to this document coming into being, Avman was entitled to keep $21.75 from that margin. That is because they were entitled to the first $18 (between $32 and $50) and they were entitled the one quarter of the difference between $50 and $65.
27. After this arrangement, that entitlement to keep $21.75 was dramatically reduced to the sum of $9. There is no reason to think that AMIL would have made this arrangement in that way and, therefore, the financial position of Avman, having given away more than 50 per cent of its margin for the benefit of others at a time when it was not under an obligation to do so, indicates to me that the financial performance of Avman is not going to be a reliable guide to the likely result of AMIL having the benefit of the Galaxy contract and performing that contract. I cannot hold therefore that the financial position of Avman, for the multiplicity of reasons that that financial position came about, is any kind of reliable guide to the assessment I have to make, which is how profitable would the Galaxy contract have been, if profitable at all, if the contract had been awarded to AMIL and had been performed by AMIL, and AMIL had incurred the other liabilities which it was under.
28. I therefore, in the remainder of this judgment, will base myself upon the calculation carried out by Mr Malizia and an examination of the ingredients of that calculation. There are four matters which need attention before one gets down to final computation. I will identify the four matters first, and then refer to them in turn. The first is how many aircraft were the subject of the Galaxy contract? The second is during what period do I assess revenues and charges? (The basic divide is between one year and two years). The third question is, assuming a Romaero rate of €32 from the 1 January 2008, do I assume a re-negotiation between AMIL and Mr Ashfield, whereby Mr Ashfield effectively gave up the commission referred to in an e-mail exchange of 20 February 2007? I repeat that this is a matter of very great significance. I have referred to the difference between the two schedule 7s, where something over £900,000 turns on that point alone. The fourth is, should I take a Romaero rate of €32 from 1 January 2008 or some other rate and, if so, what other rate?
29. The first question then is how many aircraft were the subject of the Galaxy contract? In the end I believe there is a fairly straightforward answer to that question, and the answer is eight aircraft. But, in order to explain why the answer is straightforward, and how the rival arguments are put, I need to go into it in a little more detail.
30. The question as to the meaning and effect of the contract ultimately turns on the true construction of the contract, but it is to be construed against the background of material facts. It seems to me that there are altogether six facts that I should take into account in assessing what the Galaxy contract meant as a matter of construction. The first is, before Galaxy entered into the Galaxy contract for work to be done by Romaero, Galaxy looked at possible competitors to Romaero. If Galaxy had selected a competitor of Romaero, the arrangements would have been such as not to include a role for AMIL or Avman as a middle man.
31. The second fact is that Galaxy sent 8 aircraft to Romaero and 3 aircraft to Garuda. The reason for this perhaps does not matter; there was a runway difficulty at Romaero and it was not possible to have all 11 aircraft flown into the Romaero facility by an identified cut-off date, so 3 went to Garuda. But the fact remains - and this is the important fact - 8 aircraft went to Romaero; no more were going to go to Romaero, and that was known before the Galaxy contract was entered into. That is indeed the third fact, that there was knowledge of all parties to the Galaxy contract that the maximum number that Romaero would work on was 8 aircraft.
32. The fourth fact is that, in the period before the parties entered into the Romaero contract and the Galaxy contract, AMIL/Avman were in detailed negotiations with Romaero as to the rates to be charged by Romaero and the terms and conditions which would apply to Romaero. The fifth fact is really by way of contrast to the fourth: in period before the entry into the Romaero and Galaxy contracts, AMIL/Avman made no attempt to negotiate with Garuda anything about rates or terms or conditions. The sixth fact is that the Romaero contract and the Galaxy contract were negotiated together, and I can refer to both of them when construing one of them. I will in fact refer to the terms of the Romaero contract first, and then move to the Galaxy contract which ultimately falls to be construed.
33. There are a number of terms of the Romaero contract which are material. I will not recite the full text of the terms as that would take an undue length of time, and the documents are available to the parties. The terms which are material are that Romaero was defined as the contractor; Avman was described as the customer. Clause 1 is a recital as to the intended operation of the contract. The conditions of the contract themselves are also material. Clause 1 contains definitions of Aircraft and Services. The operative provisions are clause 2, headed "Obligations of the contractor"; clause 3 headed "Obligations of the Customer"; clause 6 headed "Method of Pricing and Payment". There are then schedules.
34. In the form in which this document was presented to the Court, schedule (i) is dated some time after what seems to be the Romaero contract. It bears the date 13 June 2007. It in fact refers to three aircraft and identifies certain particulars in relation to three aircraft.
35. There follow a number of documents which are drafted so that blanks can be filled in identifying the aircraft the subject of the document, but the blanks have not been filled in. These documents to which I refer are: annexe 1, certificate of receipt of aircraft at the relevant airport; annexe 2, certificate of redelivery of aircraft at that airport; and schedule (ii) planned input and redelivery dates.
36. Just pausing there to consider the meaning of this contract, the Romaero contract, the meaning of the defined term Aircraft and the meaning of the defined term Services, everyone accepts that that contract related to either eight aircraft or a maximum of eight aircraft. As eight aircraft were in fact delivered to Romaero, it does not matter whether I say eight or a maximum of eight. But what is clear is that Romaero was not obliged to provide services to three aircraft in Indonesia, and Avman, the other party to the contract, was not obliged to provide eleven aircraft to Romaero for Romaero to work on and earn a profit on.
37. I go from there to the Galaxy contract. I remind myself that the parties to the Galaxy contract include: Avman, described as "the company"; Romaero, described as "the contractor"; Galaxy, described as "the customer"; and another company referred to as PLA. So Romaero is also a contracting party under the Galaxy contract. Again, I will not read out the full terms of the Galaxy contract but refer simply by heading to the material provisions.
38. Clause 1 is a recital. The conditions attached contain, in clause 1 of them, the definition of Aircraft and the definition of Services. Clause 2 is headed: "Obligations of the company, the contractor and PLA." Clause 3 is headed: "Obligations of the customer."
39. Clause 6 is headed: "Method of pricing and payment." The Claimant relies in particular on the terms of clause 6.2, where there is a reference to a slot booking fee, not only for an aircraft but also for each engine. After the words "each aircraft" come the words "totally eleven aircraft", and after the words "each engine" come the words "totally twenty-two engines". 6.2.9 refers to an arrangement under which there was to be an escrow account so that payments coming in from Galaxy would pass through the escrow account before being paid out as sums due under the Galaxy agreement.
40. I was also referred to cause 7.3, which deals with PLA obtaining eleven registration numbers for the aircraft, the significance being, it is said, that the figure is eleven and not eight.
41. Continuing with the Galaxy contract, as before there are documents which were drafted so that the identity of the aircraft would be given in the document, but the documents have been left blank. This applies to schedule (i), annexe 1, annexe 2 and schedule (iii).
42. The question then is: did Galaxy have an obligation owed to Avman, the other contracting party, to provide eleven aircraft to be worked upon by someone somewhere, giving Avman the entitlement to earn its profit in relation to eleven aircraft? Did Avman in turn take on obligations to render services in relation to eleven aircraft or only in relation to eight aircraft?
43. What is quite clear is that - and it is not in dispute, as I understand it - under the Galaxy contract, just as under the Romaero contract, Romaero was not obliged to provide services to three aircraft in Indonesia, and no-one, whether Galaxy or Avman, was obliged to deliver eleven aircraft to Romaero to allow Romaero to work on those aircraft and earn its fee in relation to eleven aircraft.
44. This produces the result that as one works through the express terms of the Galaxy agreement, many of which refer to the obligations of Romaero, one has to read the words Aircraft and Services, the key definitional phrases, as restricted to eight aircraft or a maximum of eight aircraft.
45. Miss Ife of counsel on behalf of AMIL says that approach gives one the wrong answer. She says that although the obligations and rights of Romaero are restricted to eight aircraft, when one turns to consider separately the position between Galaxy on the one hand and Avman on the other, the position is quite different, and there the words mean eleven aircraft. I fear that I am wholly unable to see any process of interpretation of the words of the agreement that would allow me to use or construe the word Aircraft to mean eight some of the time and eleven other parts of the time, and similarly for Services, particularly where the word Aircraft or Services are in the very same clause used once to describe both the position of Romaero and the position of the other parties inter se.
46. Before turning to other submissions which Miss Ife makes, I should express what seems to me to be prima facie the right approach to the Galaxy agreement. The Galaxy agreement is in truth what can be called a framework agreement. It sets out a large number of terms and conditions. It sets out rates. It sets out other provisions which will apply. To what will they apply? That requires the relevant aircraft to be identified for the purpose of the framework and that essential task was never done in the document which falls to be construed.
47. One has to look at the background facts to see what did the parties say to each other were to be the subject of these obligations expressed in this way. As I have indicated, the critical matter there is that everyone knew before the Galaxy contract was signed that eight aircraft at most would go to Romaero and be the subject of all the rights and obligations expressed by the same set of words for all of the relevant parties.
48. Dealing then with the particular submissions which are made, true it is that eleven is referred to in a number of places. That is easily explained because at an earlier time in the drafting of this agreement it was envisaged there would be eleven aircraft subject to the agreement. The framework accommodated eleven, but eleven were not in the end put through to be the subject of this framework. The eleven cannot mean that Romaero had an obligation to service eleven aircraft, and therefore the eleven cannot be regarded as finally defining the scope of the rights and obligations.
49. Miss Ife also attaches importance to clause 6.2.9 and to what subsequently happened so far as the escrow arrangements were concerned. What subsequently happened is that those escrow arrangements were set up, they were operated, a number of payments were made by Galaxy to the escrow agent and the escrow agent paid those sums out. But the escrow arrangement was plainly extended to things which no-one says were a matter within the Galaxy contract. In the course of argument we examined a number of points where no-one contended that the escrow arrangement defined the scope of the works the subject of the Galaxy contract. In truth, the escrow arrangements were operated more widely than did the Galaxy contract, and thus I cannot use the escrow arrangements as a means of defining, contrary to everything else, the scope of works intended by the Galaxy contract.
50. Miss Ife also points to a document entered into around the same time as the Galaxy contract which referred to eleven aircraft and three spare engines. She relies on the heading using the figure eleven. For some reason which was not explained, she accepts that the three spare engines in the same heading do not come within the Galaxy contract. Again, this is explained by the fact that at one time in the drafting eleven was intended to be the subject of the agreement; it is later changed to eight. In fact, as explained, the escrow arrangements do not have to be restricted to the same subject matter as the Galaxy contract was, and they were not.
51. Miss Ife also referred to an invoice for slot booking fees, which referred to eleven aircraft. Certainly so far as the eight aircraft at Romaero were concerned, the slot booking charge was paid and then later credited, but I do not believe I was shown what happened in relation to the three Garuda aircraft in relation to slot booking fees. If all that was done was that slot booking fees were treated as part of the escrow arrangements, that would not itself take the matter any further, because of the reasons I have given as to the operation of the escrow arrangements.
52. The result is that I conclude that the Galaxy contract provided for rights and obligations in relation to eight aircraft at Romaero and made no provision for rights and obligations in relation to three other aircraft in Indonesia.
53. The second issue is as follows: during what period should I assess revenues and charges? Mr Malizia explains in detail in his evidence that the period he takes for the purpose of his calculation, and very fairly in relation to his charges, is a period of two years. Initially this point went unremarked by the Defendants. However, I drew attention to the fact that the Galaxy contract referred either to a period of twelve months or an initial period of twelve months, so it seems to me that one should confront the question whether the Galaxy contract was for a period of twelve months or whether it gave contractual rights for a longer period.
54. The clause in question is clause 25 of the Galaxy contract, which is in these terms:

"This agreement shall become effective on the date of execution by all parties hereto and shall remain in force for one year from the date of its execution whilst the aircraft are at the maintenance facility or remain subject to this agreement. The agreement is renewable by the parties if needed."

55. At my request Mr Ramsden on behalf of the Defendants addressed me on the effect of this clause and Miss Ife replied. It seems to me that it is not straightforward to know what clause 25, in particular the last words, was intended to do. Did it give one of the parties (there being four) a unilateral contractual right to renew, if necessary, even against the wishes of the other three parties? Secondly, did such renewal, which would be on this basis a matter of entitlement, involve renewal on the identical terms or did it involve renewal on terms to be agreed? Was it envisaged, for example, that the rate would be the subject of negotiation, and what was to happen if the parties did not agree that rate?
56. If the clause did not give a unilateral contractual right to renew, is it relevant for me to ask what would have happened? I am prima facie assessing the loss of the Galaxy contract. Am I entitled to go on to add in the loss of a further contract that would be made by way of extension to the original one year? If I concluded that the one year period would have been extended to, say, two years, do I assess the revenues and charges for the second year, or do I assess what is the chance that there would have been a second year and the chance that there would have been a profit during that second year?
57. I can now describe my approach to this second question, which in some respects is inconclusive, but I do not believe that I need to be more determinative on the point. I do not think I need to decide whether clause 25 gave one of the parties to this four party contract a unilateral contractual right to renew. I think it is arguable that the clause did have that effect, but on the whole I am very doubtful about that proposition.
58. I have been able to take this undecided stance because Mr Ramsden on behalf of the Defendants has agreed that, even if there was no unilateral contractual right to renew, the Court should take into account what would have happened as a matter of fact if the one year had come to an end and further work needed to be done to the eight Romaero aircraft. Indeed, Mr Ramsden positively submitted that the contract would probably have been renewed, although he then submitted that there was only a fifty to sixty per cent chance of that coming about.
59. Conversely, dealing with this matter of what would have happened, Miss Ife submitted that the contract would certainly have been renewed. She points to the fact that Galaxy did not say the contract terminated after one year; Galaxy allowed the contract to run on. That was even where there were grounds for dissatisfaction with the performance of Avman and Romaero. How much more clear would it be that Galaxy would have let it run on if it had been AMIL who were in charge of the contract and the contract had run smoothly?
60. What I will do at this stage in the discussion is to go along with Mr Malizia's calculations as to revenues and charges for a second year on the basis that the contract would have run for two years, but when I come to make my final assessment of compensation and damages I will bring back to mind the extent to which there is some scope for uncertainty in this respect.
61. The third question is as follows: on the assumption that the Romaero rate increased from $32 to €32 from 1st January 2008, do I assume a renegotiation between AMIL and Mr Ahsfield whereby Mr Ashfield effectively gave up the commission said to be due to him pursuant to an exchange of e-mails on 20th February 2007?
62. I ought, in view of evidence given by Mr Malizia, to look briefly at the exchange of e-mails. The principal one that goes into some detail was an e-mail from Mr Ashfield to Mr Malizia, and copied to others. Mr Ashfield was raising the question as to the margin between the man hour rate payable to Romaero and the man hour rate chargeable to Galaxy. The margin was of course the principal benefit, or certainly a significant benefit, to AMIL/Avman in entering into the contract.
63. Mr Ashfield used certain figures to illustrate what he was trying to explain. He took a Romaero rate of $44 and a Galaxy rate in excess of $44. He was ready to accept that AMIL should have the first $6 up to $50 to keep, without sharing, and after $50 the surplus should be shared three-quarters to Mr Ashfield and one quarter to AMIL. At first sight, a split of three-quarter/one quarter in those ways appears surprising; however, I recall the evidence at the trial as to the significant role that Mr Ashfield played in bringing these parties together in the way which he did. At any rate, Mr Malizia stated that he had no problems with these proposals. Mr Malizia explained to me in the course of his evidence at this trial - and he indeed may have done so earlier, but at any rate at this trial he explained that he was hoping to achieve a rate payable to Romaero well below $44, and indeed he did achieve, or someone achieved, a rate of $32. So on this pair of e-mails AMIL was to keep the first $18, 32 up to 50, and only after 50 was it to share with Mr Ashfield, although Mr Ashfield would get three-quarters of that top slice.
64. So it was that in the period up to 1st January 2008, when the matter was governed by these e-mails, the position was that AMIL kept $18, or was entitled to keep $18, and only then share the figure above $50.
65. What then is to happen when, and if, Romaero increases its rate from $32 to €32? Immediately one has an exchange rate problem - exchange rates change daily - but based on some of the figures in some of the documents I will take for the sake of argument an exchange rate whereby €32 become $48.
66. AMIL's position immediately changes. Instead of it having $18 margin to keep, it has $2. As to the amount above $50, it has to give three-quarters of that to Mr Ashfield. Of course Mr Ashfield could say, if a complaint was made to him, that AMIL had done very well or would have done very well during the first period up to January 08 - his e-mail talked about $44 being the base figure payable to Romaero, whereas in fact AMIL had had the advantage of a much more profitable contract. Now the contract is turning less profitable but that, it could be said, was swings and roundabouts.
67. The reason this question arises as to whether Mr Ashfield would have been persuaded to alter the commission terms is that the case is proceeding on the basis that Romaero did genuinely increase its rate from $32 to €32. I say the case is proceeding on that basis because when Mr Malizia drew up his schedules, when in schedule 1 he referred to Romaero's rates, the earlier rates were $32 but the later rates were €32, and Mr Malizia faithfully followed through the logic of that increase in rates. But Mr Malizia says, with some force, that whilst he was prepared to agree with Mr Ashfield the terms of the February 07 e-mails when Romaero's rates were lower, it becomes very unattractive for him to continue to pay Mr Ashfield on that basis when his own margin has been so significantly squeezed.
68. Mr Malizia's solution to this was to create the first version of schedule 7. What he does is he redefines Mr Ashfield's entitlement to commission: instead of Mr Ashfield getting three-quarters of everything above $50, he only gets three-quarters of everything above a much higher base figure. In some of the earlier illustrations in schedule 7 the base figure has gone up from $50 to over $75. That produces the result that Mr Ashfield gets a commission, including the Garuda commissions (which are not strictly relevant but I will use the figures I have been provided), Mr Ashfield gets a commission of £487,000, whereas the reworked schedule 7 shows that if there had been no renegotiation with Mr Ashfield, Mr Ashfield would have got an admittedly fairly staggering figure of £1,422,000.
69. So I ask myself: should I proceed on the basis that Mr Malizia would have gone to Mr Ashfield, said to Mr Ashfield: "We have committed ourselves to €32 from Romaero, and you must now give up a very substantial sum, £900,000 plus, restricting yourself to a very much smaller figure"? Indeed, if one takes out the Garuda figures, really quite modest indeed, I think the figure goes down to, looking at Mr Malizia's schedule, £182,000.
70. I find it almost inconceivable that Mr Ashfield would have done the things that schedule 7 attributes to him. The fact that AMIL may have had to pay more to Romaero was always inherent in the agreement with Romaero. AMIL had done well in the first period, not paying $44 used in the illustration, only paying $32. Now that they have to pay more than $44, Mr Ashfield would have had a powerful argument to say: that is commercial life.
71. Further, there is no reason to think that Mr Ashfield would have given up his contractual rights because he would wish to help AMIL. He was not friendly to AMIL. There is no reason that I can see why he would have given away such a substantial sum. Some modest mitigation might have been contemplated but nothing of the order, or remotely of the order, of the schedule 7 calculation. That is the best answer I can come up with to that third question.
72. The fourth question is: should I, after all, take a Romaero rate, as Mr Malizia did, of €32 apparently from 1st January 2008, or should I take a different rate? And if I am unhappy with the 32 Euro rate, what material do I have, acting judicially, to arrive at an alternative rate?
73. I need to describe a little as to the position of the parties to the Romaero contract in relation to the rate payable. I have stated that the original rate was $32. Clause 6.4 of the Romaero contract says this:

"On 1 January 2008 and continuing on the first day of each January thereafter, the man hour rate shall be adjusted by negotiation."

74. So far as one can tell, there is no dispute resolution procedure in the Romaero agreement if the parties fail to agree. Nonetheless it was plainly intended that it would be open to a party to identify a different rate with effect from 1st January of each year. It seems to me to follow, to make this contract work, that they must have intended that the rate would be an objectively ascertainable reasonable rate which could be determined by a court in the absence of agreement, otherwise the provision simply fails to operate, and one hesitates to reach that conclusion.
75. So the question then becomes: what would AMIL and Romaero have been able to agree or what would AMIL have been able to obtain from a court decision as to a reasonable rate? I have not very much to help me on that question. At the end of the day I think I have got inadequate material, but I will refer to the material that I do have. First of all, from the Defendant's point of view, I have the actual facts of what Avman did. The facts appear to be these: that Romaero unilaterally changed the rate from $32 to €32. It is possible, although the evidence was not very clear, that Mr Wilson went to see Romaero about that, and Mr Wilson conceded €32. So if he tried to persuade Romaero to change the rate, he got nowhere.
76. I have to say that the events between Avman and Romaero are almost wholly covered up and unclear in this litigation. Although Mr Wilson gave evidence at the trial on liability and although he was in court throughout the evidence at this trial, there was no witness statement from him, no application for him to come forward and explain the position, at a time when one imagines he would have been well able to throw light into this very dark corner. As against that, it might be said in Mr Wilson's defence that until halfway through this hearing, no-one was saying that a different rate apart from €32 should be used, Mr Malizia had himself taken the 32 Euro rate - what was there for Mr Wilson to give evidence about?
77. The other matter that is said to assist me is what Mr Malizia said. He dealt with the matter in his witness statement and also in oral evidence. As regards his witness statement, he referred to this topic at paragraphs 33 to 37. At paragraph 35 he gave some evidence about the state of the Romanian economy, intended to show that Romaero would not have been in a position to ask for a substantially increased rate. He was not cross-examined on that general evidence. At paragraph 37 he makes comments that he has not seen evidence of what really went on, and he is plainly (and I think with justification) suspicious of the whole thing.
78. When he gave his oral evidence, day 1, pages 171 to 172, in answer to questions I had asked him as to his attitude to Romaero's request for an increase in the rate, he said again, consistently with his written statement, it was somewhat improbable that the rate should go from $32 to €32. He did not say very much about what rate might have been negotiated. At the top of page 172 of the transcript he said $35 perhaps, he would baulk at $40, and so on.
79. I have no hesitation in accepting that if Mr Malizia and AMIL had been involved on and after January 2008 they would have been resistant to an increase of any kind, and the greater the increase the more resistant Mr Malizia would have been. But of course a negotiation does not turn on what Mr Malizia is willing to pay; it turns on what is ultimately hammered out between two negotiating parties.
80. Standing back, given the real inadequacy of material with which I can operate, I find there is nothing really to guide me as to what would have been agreed between AMIL and Romaero. All I can say is that in my assessment AMIL would have had a very real chance of agreeing a rate with Romaero which was below €32. Where that figure would have been is not something that can be determined on the evidence that has been provided.
81. Before leaving this question of the Romaero rate, there is one other point that must not be overlooked. As the first trial on liability indicated, Avman, and indeed the Claimant before Avman, were capable of very creative accounting. Miss Harriss told me that Avman mitigated, if that is the right term, the reduction in its margin between €47 which it was receiving from Galaxy and €32 payable to Romaero, by simply falsely inflating the number of hours charged to Galaxy. Of course the hours actually charged to Galaxy had been taken forward in the computations that are the basis of the damages claim.
82. Having dealt with those matters - I can say I am well advanced towards concluding the assessment - I can return to Mr Malizia's figures, taking this time not his totals but his figures for the eight aircraft at Romaero. Working through his figures, he has in schedule 1 the man hours and the charges for the Romaero aircraft. Looking at the revenue figures, I can accept his figure, which is £5,353,049. The next item is £3,553,417, I can accept that, although it is academic because it is above and below the line it washes through.
83. The next item is handling charges. Mr Malizia's figure is £168,223. His calculation is not challenged. In other words, he has correctly computed the entitlement of the AMIL/Avman party to handling charges. Mr Ramsden says that I should award nil in relation to handling charges. I see no basis on which I could take that view. There is no reason why the contracting party should give up its entitlement to this sum against Galaxy.
84. Mr Ramsden seeks to support his contention by saying: Avman gave them up. He suggested, although he did not call any evidence to establish it, that Avman gave them up because it was good for customer relations with Galaxy. In fact, based on the document bearing the date 1st March 2007, Avman did not give up the handling charges, it handed them over lock, stock and barrel to AAPS, Mr Ashfield's company. What then did AAPS do, if that is relevant? The evidence does not establish what AAPS did. There is a document indicating that AAPS intended to calculate handling charges at a later stage and then seek to recover them. None of that has any hearing on the real position, which is that AMIL would have been entitled to make that charge.
85. The next figure is for recharges, £82,897, which is not challenged.
86. Turning then to the various figures for costs, the first cost for Romaero is £3,096,590. That is identified in schedule 1, and of course for part of the time uses the figure, the Romaero figure, of €32. So I will adopt that figure for the time being, but I will need to come back to that point. Carrying on through Mr Malizia's schedule, the next figure is the neutral one of £3,553,417, which I adopt. The next figure for additional costs, £148,254, is not in dispute. The next figure is the commission to Mr Ashfield, which is stated at £182,034.
87. I think I need to begin to react to the schedule seven debate at this point in the judgment. The £182,000 odd figure comes from the original schedule seven. If one goes to that schedule 7 the total commission there stated was £487,000 odd but, of course, that included about £306,000 for Garuda, so one has to reduce the commission if one is dealing with eight aircraft at Aerostar. The new schedule seven has a total commission of £1.422 million-odd. That, again, includes Garuda but the Garuda figures are constant, so the difference is the difference for the eight aircraft at Aerostar. If one takes £487,000 off from £1.422 million, the difference is the considerable figure of £954,992, so the difference between these two schedule sevens is of the greatest significance. The first version, the lower figure for commission, is based on an assumption which I fear I am wholly unable to make, that Mr Ashfield gives up his commission. On the face of it, Mr Ashfield is entitled to say he will have the higher figure worth an extra £900,000 plus. So I am not able to adopt the figures in schedule seven. Just to finish off figures and then to try to see what to do, I have not yet dealt with schedules five and six. Happily, they are not in dispute so I will take the figures in schedule five or six.
88. Staying with Mr Malizia's figures for Romaero, he had a projected profit of £1.376 million but he only got there by ignoring a large figure for Mr Ashfield's commission. If one added back Mr Ashfield's commission, one would have to reduce the resulting profit figure by £954,992. That would give a profit figure of £421,100.
89. I now need to consider a further revision, which is the revised schedule one. In the course of Miss Ife's closing submissions at the very end of this trial she submitted to me that I should make a finding that AMIL would not have agreed €32 with Romaero and schedule one should be recalculated using a different Romaero rate, not €32. Overnight I was provided with a revised schedule one, where I can compare three alternative rates with the rates used in the original schedule one. The new rates are $35, $40 and $44. They, of course, bring the costs payable to Romaero down significantly. I have calculated the savings to be as follows: if Romaero had charged $35, the savings compared with Mr Malizia's original schedule one would be £806,512. If the Romaero rate was $40, the savings would be £545,984 and if the rate was $44, the savings would be £337,552. I have already calculated that if one reworked Mr Malizia's figures for the eight Romaero aircraft but adds back Mr Ashfield's commission, one gets profits of £421,100. If one adds in the middle saving of the three savings to which I have referred, one gets a figure of £967,084. So a great deal turns on the Romaero rate. Should I compute on the basis that Mr Ashfield gets the full amount of commission, reducing the profits for AMIL to £421,000? Should I assume AMIL would have done far, far better with Romaero, boosting its profits to £967,000?
90. I have already explained the real difficulty I have been given in coming to conclusions on the material or lack of it in this case. I think at this point I stand back and I have to factor in a number of matters that I have left unstated. One is would the contract have run smoothly? Would there be penalty payments? Miss Ife says in the first year there would not have been because the clause was ineffective. Mr Ramsden says even if that is so, in the second year, if extended, the clause would have been made effective. On the evidence before me I think there is quite a high probability that a well-run contract would not have involved any significant sum by way of penalty payments. Thirdly, there is uncertainty about the Romaero rate and fourthly, there is argument about what should be done about Mr Ashfield's commission. Having regard to the uncertainties, the greatest one relates to the Romaero rate. I have given in my earlier calculation very considerable benefit of the doubt to AMIL that it would have secured a rate of $40, as compared with €32, that resulted in a figure of £967,000 approximately in terms of profit.
91. Doing the best I can do balance a lot of things, the weight of which I cannot be expected to assess, I do not think that the profit on this contract would have been above £800,000. At the end of the day, that seems to me to be the best estimate that anyone could come up with on the material as to what would have been secured. It follows that the equitable compensation should be 80 per cent of £800,000, which is £640,000. The damages should be in the same figure. That is the award that I make on this assessment.