Foster & Anor v Action Aviation Ltd

“Faster, Farther, Higher” is a selling catchphrase of the SJ30 business jet aircraft.

The SJ30 is a light twin-engine jet aircraft equipped for up to seven occupants and certified for single pilot operations. It has a combination of range (2,500 miles), operating ceiling (49,000 ft) and speed (486 KTAS) which compares well with aircraft from more established manufacturers such as Cessna, Bombardier, Embraer and Hawker. However, despite its impressive design and potential it has never been produced in significant numbers. To date only four aircraft have made it off the production line.

The dispute between the parties arises out of a purchase agreement for SJ30 Serial Number 007 (US Registration N7SJ – “the aircraft” or “007”).

By an Aircraft Purchase Agreement signed on 31 August 2010 (“the APA”) the Second Claimant purchased the aircraft from one or more of the Second to Fourth Defendants. The purchase price was US$5m, of which US$2.3m was the trade-in price agreed for the Claimants’ existing 2008 Cessna 510 Mustang jet. The Defendants delivered the aircraft on 15 December 2010.

Two and a half months later, on 2 March 2011, the Claimants sought a refund and demanded that the Defendants take the aircraft back pursuant to a buy-back clause in the APA. The Defendants refused to do so. Eventually the aircraft was sold in April 2012 for US$2,669,556.

In essence, the Claimants claim as damages the difference between the monies paid by them for the aircraft and those realised on its eventual resale. These damages are claimed in contract for alleged breach of the buy back clause and in tort for alleged misrepresentation.

The alleged misrepresentations relate to the accident history of the aircraft and the finances of the manufacturer, Emivest, and its ability to provide continuing support for the aircraft.

In relation to the aircraft’s accident history, the Claimants contended that in the course of negotiations the Third Defendant, Mr Harding, told the Claimants that the aircraft had not previously been in an accident, assuring them that he had bought it from new. The Claimants contended that the aircraft had in fact suffered an accident in the course of attempting to land at Cascais Airport in Portugal on 15 May 2009 when Mr Harding had been the pilot in command and the representation made was fraudulent or at least negligent. The Defendants denied that any such representation was made and further denied that any such representation would have been untrue.

In relation to the finances of the manufacturer, the Defendants sold the aircraft with promises to the Claimants of a full 5 year “new aircraft factory warranty”, promises of factory pilot training for the SJ30, promises of factory engineer training and promises of assistance with the certification of the aircraft with the South African Civil Aviation Authority (where the aircraft was to be based and registered). In fact, within 1½ months of the making of the APA, the manufacturer filed for Chapter 11 bankruptcy. The Claimants contended that implied representations were made that Emivest was a going concern which was capable of providing the future support which the Defendants’ promises entailed, which representations were untrue and were made without reasonable grounds for believing them to be true. The alleged representations, their falsity and absence of reasonable grounds were denied.

The Claimants further contended that the representations and the APA were made on behalf of Mr Harding and the Fourth Defendant (Mr James) as joint principals and real joint beneficial owners of the Action Aviation business and the aircraft. The Defendants contended that the APA was made with the Second Defendant and/or the legal owner of the aircraft, Action Aviation Holdings Inc, on whose behalf any representations were made.

The Claimants’ tortious claim is for £2,017,063. Its contractual claim is for £1,904,040.

The essential issues which arise for determination may be summarised as follows:

The First Claimant, Mr Foster, is a British Citizen. He and his wife live in Swaziland. They own and run a white goods manufacturing business under the brand “The Fridge Factory” which is well known in Southern Africa.

Mr Harding and Mr James are the founders and shareholders of a number of companies which trade under the name “Action Aviation” (“AA”), which companies include the First and Second Defendants. The business of AA is the buying, selling and operating of aircraft. Mr Harding is generally described as the Group Chairman and Mr James as the Group CFO.

The witness evidence of the Claimants at the trial was given by Mr Foster, Mrs Foster, Mr Nevile Houareau (the owner of a maintenance facility at Mustapha International Airport); Mr Michael Giles (an experienced commercial pilot who acted as a pilot and sales and marketing promoter for AA from February to May 2009) and Mr Michael Creed (managing director of the First Defendant from November 2005 to February 2009). There was also a CEA witness statement from Mr Richard Davis, the CEO and Chairman of America Aerospace Inc and an unchallenged witness statement of Mr Peter Royce (commercial pilot and former pilot for AA).

The witness evidence of the Respondents at the trial was given by Mr Harding; Mr James; Mr Mark Butler (Regional sales director for AA); Mr William Barclay (pilot contracted to AA); Mr Don Philpot (licensed aircraft engineer contracted to AA) and Mr Michael Mascarenas (former CEO of Emivest). There were also witness statements which were substantially unchallenged from Mr Jose Pereira (former flight operations manager, Helibravo, Cascais, Portugal) and Mr Joao Bravo (owner Helibravo Helicopters, Cascais, Portugal).

In the light of the major factual disputes concerning the alleged representation as to the accident history of the aircraft and the circumstances in which the representation was allegedly made, I directed that the evidence on that issue should be given orally by way of examination in chief rather than by witness statement.

Mr and Mrs Foster lead busy lives. Business success has brought with it the pressure to take frequent international flights, often at short notice. In 2008, they purchased a nearly new Cessna Mustang jet. The Cessna was certified for single-pilot operation. With manufacturer support they were able to maintain the aircraft, operate it and employ a suitably-qualified pilot. But, by the end of 2009, Mr Foster had come to the conclusion that the Cessna’s performance was inadequate for their particular needs. For example, it could not fly the Swaziland/Cape Town sector without stopping to refuel.

Mr Foster had seen the SJ30 at the EBACE air show in 2008, displayed by a business calling itself “Action Aviation” and remembered its impressive performance figures. In December 2009 he established contact with Mr Butler. Mr Butler’s business card and his email signatures described him as the “Regional Sales Director” of “Action Aviation”. In the business card AA’s business was referred to as being that of distributor for the SJ30.

Mr Foster expressed interest in the SJ30. Negotiations proceeded over 8 months until the APA was made on 31 August 2010. The negotiations were conducted largely by Mr Butler, with occasional interventions by Mr Harding, whom Mr Butler described as “my Chairman” and as an experienced owner of an SJ30.

At first, Mr Foster was offered 006 which was owned by the factory and was, apart from 007, the only other production SJ30 which the factory had delivered. It had flown about 900 hours. He was then offered 013, a new aircraft which Mr Butler said to be due for completion by the factory in less than a year. Finally, in May 2010, he was offered 007 which was described by Mr Butler as having flown 170 hours since new (220 in total). He told Mr Foster “we own the aircraft free and clear” and on that basis was able to take Mr Foster’s Cessna in part-exchange. During the latter stages of the negotiations, 007 was marketed to Mr Foster by way of comparison with 013 as an “as new” aircraft.

007 was used by AA as a demonstrator aircraft. On 15 May 2009 the aircraft had suffered a “hard landing” at Cascais in Portugal as a result of late wind shear on final approach. Both wing tips and the ventral fin and rudder were damaged by contact with the ground. The manufacturer produced a report on the damage and the proposed repairs and the aircraft was grounded until these were carried out. In the event this took some seven months and cost over US$100,000.

A part of the negotiations was devoted to the question of after-sales support. Jet aircraft of this sort are complex to maintain. In order for the aircraft to remain airworthy, the manufacturer has to maintain “type” approval by the US Federal Aviation Authority (“FAA”). Type-specific training and recurrent certification of pilots is required. Such aircraft have to be maintained by licensed engineers, trained on type. Maintenance work has to be completed pursuant to the type-specific maintenance manuals, maintenance schedules and periodic service bulletins (SBs), issued and kept updated by the manufacturer. New parts have to be properly certified and traceable.

During the course of negotiations Mr Foster was offered a “new aircraft” factory warranty, for 5 years on the airframe and 2 years on the avionics and systems; the services of a fully certified SJ30 pilot, with a single pilot rating (saving the costs of a second pilot) plus factory training for a permanent pilot; factory training for the engineer who would be employed to look after the aircraft plus the use of AA’s factory trained engineer for 6 months in the meantime; and for the costs to be met of sending inspectors from the South African Civil Aviation Authority to inspect the factory for the purposes of certifying the aircraft type and allowing the aircraft to be moved from the US register to the South African register where it was to be kept.

At the invitation of Mr Butler, Mr and Mrs Foster went to Dubai between 10 and 14 April 2010 for a demonstration of the aircraft. It was common ground that the first attempt to have the demonstration was put off to a later day because of technical difficulties with the aircraft. It was also common ground that Mr Harding and Mr Barclay met Mr and Mrs Foster at Dubai airport that day, 11 April 2010. It was the evidence of Mr and Mrs Foster that Mr Butler was not present. It was the evidence of Mr Butler, Mr Harding and Mr Barclay that he was. It was the evidence of Mr and Mrs Foster that they were then taken out to the aircraft and it was whilst Mr Harding was showing them the aircraft that he made his representations as to the accident history of the aircraft. The evidence of Mr Harding, Mr Butler and Mr Barclay was that Mr and Mrs Foster were not taken to the aircraft that day, that the only conversation with them took place in the airport lounge. Mr Harding denied making the alleged representation there or anywhere.

The demonstration flight eventually took place on 13 April 2010 with Mr Foster but not Mrs Foster. He was very impressed by the demonstration. Mrs Foster was less enthusiastic about purchasing an SJ30, because she felt that the manufacturer was small and relatively unknown. She would have been happier buying from Cessna. Cessna had been advertising a “no worries” guarantee of buy-back for its aircraft and this prompted Mr and Mrs Foster to ask for a buy-back guarantee in respect of the SJ30.

Sale terms for 007 were first offered to Mr Foster on 11 May 2010. Five drafts of the APA were sent to Mr Foster before the fifth and final draft was agreed. Drafts were sent on 18 July, 9 August, 12 August, 24 August and 26 August 2010.

By early August the price had been reduced from US$5.95 million to US$5 million. Mr Butler explained to Mr Foster that other buyers were in negotiation with them and that interest had become more serious following the reduction in price. On 24 August 2010 Mr Butler informed Mr Foster that they had a buyer in Las Vegas who was prepared to place a deposit on 007. This was a deal which had been negotiated by Mr Harding rather than Mr Butler.

The APA was signed on 31 August 2010. Mr Butler flew out in person to obtain Mr Foster’s signature and met him at the Fridge Factory. The draft contract contained a typed buy-back clause, which could only be exercised in limited circumstances. At the time of signature, a manuscript addition was inserted alongside the typed clause, the effect of which is in dispute.

As soon as the APA was signed, Mr and Mrs Foster paid the deposit of US$500,000.

The delivery date specified in the APA was August 2010. There were delays.

On 20 October 2010, Emivest petitioned for Chapter 11 bankruptcy protection in its home state of Delaware. Mr Foster expressed concerns, and Mr Harding gave him a number of assurances. For example, on 6 November 2010 he stated that: “I have been selected by the US Trustee to serve on the creditors’ committee …there is really no doubt that [AVIC] will buy Emivest Aerospace… so I continue to think there is an extremely small risk that the SJ30 will not go forward from here…”. On 8 December 2010 he stated: “CAIGA … continue to be 100% in favour of buying the company and injecting $200m into the SJ30 programme to take it to full production…I think it is only fair that you have the complete inside picture, which is that CAIGA will buy this company in the January/February bidding process and this programme will be going forward more strongly in future than it ever has before.”

The sale was completed on 15 December 2010 and Mr Foster formally took delivery at Cranfield.

Mr Harding then flew the aircraft and Mr Foster to Southern Africa on a trip Cranfield/Luxor/Mombasa/Matsapha/Durban/Lanseria/Matsapha, finishing on 21 December 2010. Mr Harding did not then have a single pilot rating, so Mr Barclay flew as the second pilot.

Mr Harding declined, on this trip, to land at Virginia Airport (Natal, South Africa) where Comair (Mr Foster’s intended aircraft maintenance organisation) were based. He said that the brakes were not properly balanced and, in those circumstances, the runway was too short to attempt a landing.

Over the next 10 weeks, Mr and Mrs Foster became increasingly concerned about their purchase. In summary, those concerns were as follows:

Mr and Mrs Foster had only one further trip in the aircraft, a business trip via Matsapha/Durban/Cape Town/Windhoek/Matsapha. Again, Mr Harding acted as pilot, in tandem with Mr Barclay. There were two incidents of note. First, Mr Harding again declined to land the aircraft at Virginia Airport. Second, soon after take off from Cape Town, the wing slats failed to retract and the aircraft had to be flown at reduced speed to reach Windhoek.

The Defendants attempted to suggest solutions to the concerns, but Mr and Mrs Foster did not find them satisfactory. In the light of their concerns, Mr and Mrs Foster decided to seek to exercise the buy-back guarantee and, in an email on 2 March 2011, they asked for that the aircraft be taken back and for a refund of their money. The Defendants disputed their entitlement to do so and refused to buy it back. Instead, they accepted the aircraft back purely on the basis that they would attempt to sell it on Mr Foster’s behalf. It was collected from Matsapha on 13 May 2011.

Over the following period, 14 May-19 September 2011, the Defendants did not introduce any prospective buyers to Mr Foster and no offers were made to buy the aircraft.

In the period 8 July – 26 August 2011, Mr and Mrs Foster made a number of requests to Mr Butler for information about the aircraft including the hangar location, and for sight of the flight log and bill of sale. They were not given the information and documents they sought. Increasingly concerned about the aircraft, they learnt from other sources of it being flown to England and had it repossessed at Cambridge Airport on 19 September 2011.

The aircraft documents were not handed over. A series of demands for the return of the documents in September, October and early November 2011 were not complied with. The aircraft could not be maintained, operated, sold or even repositioned without them. An order for delivery up forthwith was made by Eder J on 11 November 2011. Some documents were handed over on 24 November 2011, but the flight logs were not finally handed over until 2 December 2011, more than 2 ½ months after the original demand and 3 weeks after the “forthwith” order for delivery up.

Given the troubles of the factory, Mr and Mrs Foster believed that it would be difficult to find anyone interested in buying the aircraft. It was repeatedly offered to the Defendants who declined. Mr Foster made a further attempt to have the aircraft certified in South Africa so that it could earn charter income. The purchasers of the factory assets (then re-named Syberjet) declined to assist.

On 10 April 2012, the aircraft was sold to Syberjet for US$2,669,566 net. On recovery of the aircraft from the Defendants it was found that there were a number of outstanding SBs and maintenance items which had to be addressed. The price achieved effectively included the cost of the outstanding items, which were borne by the purchaser.

The APA provided so far as material as follows:

There were major factual issues in relation to this alleged misrepresentation. The Claimants alleged that the representation was made beside the aircraft at Dubai airport on 11 April 2010 by Mr Harding to Mr Foster in the presence of Mrs Foster and that the only other person present was Mr Barclay who was at the front of the aircraft and out of earshot. The Defendants not only denied that the representation was made but they also denied that there was any visit by Mr and Mrs Foster to the aircraft on that day and contended that the only meeting with them was in the Fixed Base Operation (“FBO”) lounge at which Mr Butler was present and indeed led the discussion.

The background to the meeting was largely common ground. Mr Foster and Mr Butler had agreed that there would be a demonstration flight of the aircraft in Dubai. Mr and Mrs Foster and Mr Butler flew to the Middle East for that purpose. The flight was scheduled for 11 April 2010.

The aircraft was at Sharjah and when Mr Barclay and Mr Butler went to the aircraft on the morning of 11 April 2010 they were told that a bird had been seen going into the tail. Mr Barclay investigated and found and removed the remains of a nest. Mr Harding then arrived and after checking that all systems and controls were working correctly he and Mr Barclay flew the aircraft to Dubai with Mr Butler on board. During the flight one of the two electrical pitch trim actuators failed. After landing in Dubai the fault could not be rectified and it was decided that the aircraft would have to be grounded pending investigation and repair by Mr Philpot who would have to be flown out from Texas. This meant that the proposed demonstration flight could not take place that day and that this would have to be explained to Mr and Mrs Foster, who had already been kept waiting for about two hours.

Mr Foster’s evidence was that he and his wife were met at the FBO lounge by Mr Harding and Mr Barclay, neither of whom they had met before. Mr Butler was not present. They introduced themselves and were told by Mr Harding that the reason for the delay was that there was a bird’s nest in the tail of the aircraft and that he would like to get his engineer, Mr Philpot, out from America to come and check the aircraft out. He and his wife then told Mr Harding that they would like to see the aircraft, not having seen it since EBACE in May 2008. Mr Harding mentioned that it was dirty but they said they still wanted to see it. They then went through security where there was an X ray machine and had to produce their passports to get out. They were taken by minibus to the ramp by the aircraft. The first thing they did was to look at the ‘boot’ so that Mrs Foster could see what room there was for suitcases. They then walked towards the cabin door. Mr Foster had been asking Mr Harding about the aircraft and its performance and he then asked him if the aircraft had ever been in an accident and Mr Harding replied “No. I bought the aircraft new; it’s never been in an accident”. They were then shown the interior of the aircraft following which they returned to the FBO. They met Mr Butler at their hotel the following day, 12 April 2010. On 13 April 2010 the demonstration flight took place. His wife did not come on that occasion having preferred to go shopping.

Mrs Foster’s evidence was to similar effect. She said that it took a little while for Mr Harding to organise it for them to go out to the aircraft and that the officials kept their passports whilst they did so. She said that they were chatting with Mr Harding between the wings and the stairs when Mr Foster asked if the aircraft had been in an accident and that Mr Harding said: “No, no, I’ve had it since new”. Mr Butler was not present that day and the only meeting with him was at their hotel.

Mr Harding’s evidence was that following the problem with the pitch trim actuator on the flight to Dubai they tried to rectify it after landing. They could not do so and he then phoned Mr Philpot. Mr Philpot could not see an obvious way of resetting it so they concluded that he would have to come out to fix it. Mr Harding, Mr Barclay and Mr Butler then went into the FBO where Mr and Mrs Foster were waiting for them. Mr Butler introduced them. The Fosters, and particularly Mrs Foster, were upset that they were late and became even more so when Mr Butler explained that because of the bird’s nest issue there was a technical issue on the aircraft and they would not be able to fly them. There was then a discussion about the bird’s nest issue. In the context of how safe the aircraft was he said he had flown the aircraft since they had had it delivered, that he knew the aircraft very well, and that it was a safe and reliable aircraft. The meeting then broke up and they parted. There was no visit to the aircraft that day. The visit to the aircraft took place on 13 April 2010 and was by Mr Foster alone. He was taken out by Mr Harding, Mr Butler and Mr Barclay. Mr Philpot was already out at the aircraft. He said they talked about the aircraft and he would have said all the normal positive things about it.

Mr Butler’s evidence was that he was not sure if he went into the FBO lounge first or whether the three of them went in together, but he remembered going in and sitting down and explaining to Mr and Mrs Foster that unfortunately there had been an issue with a bird going into the back of the aircraft which had caused the pitch trim actuator to fail in flight. He said that he handled it fairly gingerly and that Mrs Foster was immediately put off, whilst Mr Foster was more understanding. There was a discussion about the SJ30 in general and he tried to explain that it was a very reliable aircraft. They also discussed possibly putting brush material around the opening to stop things going in. It was not a comfortable meeting and it was left on the basis that he would come to the hotel the following day to update them. He had a further meeting with the Fosters the following day at the hotel when he went over Mrs Foster’s concerns for the aircraft and its reliability. On the 13 April 2010 Mr Foster came out on his own for the demonstration flight. He remembered Mr Foster asking Mr Philpot something like “Is it safe to fly?”

Mr Barclay’s evidence was that when he and Mr Harding arrived at the FBO lounge Mr Butler was already there with Mr and Mrs Foster. There was a discussion about being late and the bird nest issue. The Fosters did not come out to the aircraft that day. Mr Foster came out to the aircraft on 13 April 2010 for the demonstration flight.

All the witnesses maintained the essentials of their accounts during cross examination.

There were initially few documents which bore on these disputed facts. However, following the close of the Claimants’ case the Defendants produced some documents which they had obtained from Execujet, the company which provided handling services at Dubai. These showed that Mr Butler was on the flight to Sharjah from Dubai on 11 April 2010. One of these documents was an Execujet Handling Services Document which set out work and services provided and included the following entry:

“Pax transport for A/C viewing (FBO x1)”

The Claimants placed strong reliance upon this as supporting their case that a viewing took place on 11 April 2010. The explanation given by Mr Butler in evidence was that he had requested the transport on arrival in Dubai but later cancelled it in the light of the negative tenor of the subsequent meeting with Mr and Mrs Foster and that it did not end up being used. He had made no reference to this in his statement but said that his memory had now been triggered.

Mr Harding said that he had no knowledge of the booking but, having discussed it with Mr Butler, “we” believed that the order was placed by Mr Butler at the aircraft when the FBO person came out and that was what “we understand happened” – “that’s what we think happened”. He said that this could be referring to that order or to the fact that they went out to the aircraft later that day (without the Fosters).

Subsequent to the hearing the Claimants obtained some further Execujet documents which I shall address below, but it is to be noted that, if the entry reflected an order made by Mr Butler on arrival, then it went a long way to undermining the statement evidence which had been given, and the case which had been put to the Claimants’ witnesses, namely that a viewing did not take place that day because of impracticalities, particularly as to security, the afternoon heat and dirt on the aircraft. On the Defendants’ witnesses’ own explanation of this further evidence, arrangements had been made for a viewing on arrival at Dubai notwithstanding these difficulties. The essential reason now put forward was Mrs Foster’s negative attitude rather than impracticalities.

The Claimants submitted that the probabilities favoured the representation being made. In this connection they relied in particular on Mr Harding’s own evidence that he gave assurances about the history of the aircraft, the fact that the aircraft was subsequently put forward as an “as new” aircraft and Mr Foster’s expressed interest in the flying history of the aircraft.

The Claimants were also strongly critical of Mr Harding’s approach and evidence. I find that there is force in a number of the points made. In particular:

In relation to the last point, in his First Affidavit Mr Harding said that he recalled that Mr Foster had asked him before the demonstration flight if the aircraft had any known problems and he responded that it had not and that it was fully airworthy and “had absolutely no squawks (faults) outstanding”. This suggested that the conversation took place on 13 April 2010 after the fault had been fixed. In his witness statement, Mr Harding described a similar conversation on 11 April 2010 in terms that he said that it would be fully airworthy and “would have absolutely no squawks (faults) outstanding”, but made no mention of any conversation to that effect on 13 April 2010. In his evidence he suggested that there were conversations about airworthiness on both 11 and 13 April 2010. It was also stressed that in his witness statement Mr Harding acknowledged that on 11 April 2010 he told Mrs Foster that “I had flown the aircraft since it was new and that it had been a very safe and reliable aircraft, and I tried to reassure her that it was very safe to fly”. This was the first time he had accepted addressing the history of the safety and reliability of the aircraft. In cross examination Mr Harding suggested that he was talking about the SJ30 generally rather than 007, but that is not how his statement reads and I reject that explanation. The Claimants submitted that these “twists and turns” in his evidence are characteristic of false evidence.

I accept that Mr Harding’s approach and evidence were not satisfactory, but on the important issues of whether there was a visit to the aircraft on 11 April 2010 and whether Mr Butler was present, his evidence was supported by adamant evidence from Mr Butler and Mr Barclay.

In this connection the Claimants pointed out that there were a number of similarities between the statements of Messrs Harding, Butler and Barclay. Various matters are expressed in the same or very similar terms and Mr Barclay mentions irrelevant but prejudicial points that Mr Harding was keen to raise in his statement. It was suggested that this showed a willingness on their part to follow a “party line” as directed by Mr Harding.

The similarities in the language used and the points made in the witness statements was an unsatisfactory feature of the evidence. It was Mr Butler’s evidence that he answered the solicitor’s questions and a draft statement was provided to him by them which he signed, and that there was no contact with or involvement by Mr Harding, who was out of the country, other than a request to provide a statement. However, whether or not there was direct contact, both his statement and that of Mr Barclay show a willingness to allow their evidence to be marshalled and to use words that were not their own.

There was a particularly striking similarity of content in the sections dealing with the reasons why the Fosters would not have viewed the aircraft on 11 April 2010 due to the impracticalities involved. The Claimants’ described this as a “set piece position” or “party line”. Mr Harding described it in evidence as “all part of the logic we were using”. This suggests evidence by direction or committee, as did Mr Harding’s explanation in evidence of the Handling Services Agreement document.

The Defendants submitted that the overwhelming probability was that there was no aircraft viewing, that Mr Butler did meet with the Fosters that day and that the alleged representation was made up.

In terms of probabilities, the strongest point in favour of the Defendants’ version of events was the seeming implausibility of Mr Butler not being at the meeting with the Fosters. Mr Butler had flown to the Middle East and then to Dubai for the purpose of going on the demonstration flight with Mr and Mrs Foster. They were his clients and this was his sale. No-one else at AA had had contact with them before. He arrived in Dubai with Mr Harding and Mr Barclay. Their lateness and the fact that no demonstration flight was going to be possible meant that there was an explaining to be done. One would expect Mr Butler to do this rather than to leave it to them to explain the situation and going off without even seeing the Fosters. It was further asserted that it is unlikely that he would have gone off without seeing the Fosters as the main exit is through or close to the FBO lounge. Against that, Mr Harding was his superior, had a controlling interest in the aircraft, was its pilot and was the person with the most knowledge of and interest in it. He was also the person best able to explain the technical difficulties which had arisen. Further, Mr Butler met with the Fosters the following day, a meeting for which there would be no very obvious purpose if they had only just met. In addition, there is no obvious reason why the Fosters would lie about Mr Butler not being present. It makes no real difference to their case, since the alleged representation was made by Mr Harding. It was suggested that this may have been a ruse to ensure there were no witnesses to their conversation with Mr Harding, but this assumes a calculating degree of dishonest ingenuity that did not chime with the impression given by them in oral evidence.

The other main points made by the Defendants were that:

In cases of stark disputes of fact such as this any light shed upon the dispute by contemporaneous documents is likely to be of considerable importance. In this connection two further documents were obtained by the Claimants after the hearing. These documents were obtained when Mr and Mrs Foster accompanied by junior counsel went out to Dubai to persuade Execujet in person to provide their entire file, attempts to do so by phone and email having failed. There was a disputed application for late admission of this further evidence on which I ruled in the Claimants’ favour.

The first of these documents is an email timed at 7.17pm on 11 April 2010. This is an internal Execujet email which reports on the handling and movements of the aircraft that day. Its author was Ms Marilet Garcia, an Execujet FBO Customer Service Agent. The email refers to the viewing and does so in the past tense, stating:

“Services:

Pax transport (FBO – passengers came to view the a/c)”

The other document is a “Flight Details & Requirement Sheet” of Executive Flight Services who are a supplier of airside services at Dubai, including to Execujet. It records airside services provided in respect of Execujet’s customers, in this case the Defendants. It is a printout from EFS’s server on 11 April 2010, which was given to Execujet and therefore made its way on to Execujet’s file. It states:

“Pax Out – 02”

There is also a manuscript entry as follows:

“Passengers dropped by EJME PREVIA as per Passengers Request”

EJME is Execujet Middle East and the reference to Previa is a reference to a Toyota Previa vehicle of Execujet’s which is kept airside.

The Claimants submitted that these are two contemporaneous documents, dated 11 April 2010, which record the viewing of the aircraft that day.

The Defendants disputed the Claimants’ interpretation of the documents and submitted that they were at best equivocal and that they are of little or no weight in the absence of a witness statement from Execujet explaining them.

In relation to the first document they submitted that it did not show that the “passengers” actually did see the aircraft and that it was not inconsistent with a booking having been made and cancelled. Alternatively, it related to the visit made to the aircraft without the Fosters on that day.

In relation to the second document they submitted that the entries related to the 13 April rather than the 11 April visit. They pointed out that it includes a number of entries for the 13 April and that the crew and passengers “out” referred to those who went “out” to the aircraft that day, as opposed to the entries for those who came “in” on 11 April. They also pointed out that it records 3 crew and 2 going out whereas, on the Claimants’ case, only 2 crew went out on 11 April. By contrast 3 crew did go out on 13 April and there were 2 passengers if Mr Philpot is included. They further pointed out that the manuscript entry comes after one for an external wash, which was carried out on 13 April and that another 13 April document appeared to have an imprint of the “passengers” transport entry on it, which suggests it was made on that day. I accept that the doubt about the timing of the relevant entries means that this document does not advance the Claimants’ case.

I consider, however, that the first document does support the fact that there was an aircraft viewing that day. That is what it says and it is a third party, contemporaneous document. There was no witness statement from Ms Garcia but there was a witness statement recording what she had told junior counsel. She told her, as is reasonably apparent from the document itself, that the purpose of the email was to inform Execujet of what services had been provided to the aircraft that day. She did not purport to have any recollection of the matter but, as one would expect, she confirmed that she was on duty that day and would have known if the viewing had taken place. The Defendants objected that there was no witness statement from her and said that the explanation given, namely that “given the strict laws in Dubai, she was afraid to do so” was unsatisfactory. However, I accept that her unwillingness to give a statement directly does not undermine the credibility of what she told junior counsel, which was very much what one would expect her to say.

This document also provides support for the Claimants’ case as to the meaning of the Handling Services Agreement document. That was in any event the most obvious meaning of the reference to passenger transport in that document. The explanation given that this was a prospective booking was not convincing as there would be no good reason to record if it was a service which was never provided. Further, Mr Harding in evidence gave the strong impression that this was an explanation which had been collectively decided upon with, in particular, Mr Butler. Mr Harding stated in a further witness statement that it may have referred to a visit made to the aircraft by him, Mr Barclay and Mr Butler after their meeting with the Fosters. However, that was not consistent with Mr Butler’s evidence at trial, which was that the passenger transport was not used. They were also crew rather than passengers, and crew transport was dealt with separately on the document.

I accordingly accept that these two documents taken together provide important, third party contemporaneous documentary evidence that there was an aircraft viewing on 11 April 2010. Further, the Fosters would be unlikely to have gone to all the trouble of trying to obtain the additional documents if they knew that there was no viewing that day.

After careful consideration of the written and oral evidence and submissions and the inherent plausibilities/implausibilities, I find that there was an aircraft viewing that afternoon as stated by Mr and Mrs Foster. I further find that Mr Butler was not at that viewing. It is possible Mr Butler did meet the Fosters that afternoon in the FBO lounge and that they are mistaken about this, but I consider it more likely that he decided that the technical reasons for the delay were best left for Mr Harding to explain, that the selling opportunity would be during the demonstration flight itself and that he went off to the other appointment he had that day, his arrival having been delayed.

I further find that during that viewing Mr Harding made the “no accident” representation as alleged. On his own evidence there was a discussion that day of history, safety and reliability and an enquiry about the accident history of the aircraft would fit in with such a discussion. Further, on his own evidence he did not consider that the aircraft had had an accident and so it would not be surprising if he so stated. In addition, my rejection of his evidence that there was no aircraft viewing that day undermines his denial of the alleged representation.

There was a further issue between the parties as to whether such a representation, if made, would have been untrue. The Claimants contended that in context the word “accident” is to be given its ordinary meaning of an unintended and unexpected occurrence producing loss or damage. The Defendants contended that in the aviation context an “accident” would reasonably be understood in a discussion between pilots, such as Mr Foster and Mr Harding, to mean a reportable accident under FAA regulations, which they said this was not.

I have no doubt that in the context of the discussion between Mr Foster as a prospective buyer and Mr Harding as a prospective seller the question asked was a general one and that Mr Harding’s answer would reasonably be understood as meaning that there had been no accident, using the ordinary meaning of the word rather than any specialist or technical meaning.

On that basis, the Cascais incident was clearly an “accident”. The aircraft tail and wings hit the ground hard, causing extensive damage, as illustrated by the photographic evidence. The movements of the aircraft and the impacts were sufficiently dynamic to create a lasting impression on the occupants. The co-pilot, Mr Giles, feared for his safety – “it was the closest I have come to wondering whether I would survive the next few seconds”. Mr Harding agreed that it was a “once in a lifetime incident” for him and a “shock” and for Mr Butler it was “out of the ordinary” and “very alarming”. The damage was sufficiently serious that the aircraft could not fly, even on a ferry flight to the factory to be repaired. The yaw damper rudder, a flying control surface, was so badly damaged it had to be replaced. The repairs cost at least US$ 119,000. The aircraft was not released to service for seven months, although at least some of the delay was because the manufacturer would not complete the repairs without agreement on the payment of remainder of the original purchase price.

The Claimants further contended that Mr Harding must have known that that representation was untrue and that it was made fraudulently. In support of such a case it was suggested that there had been attempts to falsify the flight logs and to conceal the identity of Mr Harding’s co-pilot at the time of the Cascais hard landing. That case was not made out and was not ultimately put to the author of the logs, Mr Philpot. Reliance was also placed on a statement made by Mr Harding for the purpose of post-completion insurance that he had no accidents in the past 5 years which it was said he must have known was untrue, but this statement can be regarded as equally consistent with that being his genuine understanding and, if anything, bearing that out. Further, although it is not necessary to decide whether or not the Cascais incident was a reportable accident under FAA regulations, there are reasonable grounds for believing that it was not.

Although I have rejected parts of Mr Harding’s evidence, I nevertheless accept that he believed and believes that an “accident” in the aviation context means a reportable accident, that he did not believe that the Cascais incident was reportable and that it was in that sense that he thought he was stating that there had been no “accident”. I also accept that there would have been no reason for him to lie about this as the Cascais “hard landing” was recorded in the pilot log and the maintenance logs, with details of the repairs set out in the latter, and his expectation was and would reasonably have been that those documents would be inspected by or on behalf of Mr Foster when carrying out normal pre-purchase due diligence. I accordingly reject the Claimants’ case that the “no accident” misrepresentation was made fraudulently, but accept that it was made negligently. Mr Harding should have appreciated that he was being asked a general, non-technical question and should not have answered on the basis of FAA reportability without making that clear.

I further find that reliance and inducement are sufficiently proved. If Mr Harding had stated that there had been an accident then Mr Foster would have inquired about the details and, having done so, would probably not have bought the aircraft, as he stated in evidence.

In summary, in respect of the accident history of the aircraft the claims in negligent misrepresentation and under section 2(1) of the Misrepresentation Act succeed, but the fraud claim fails.

The Claimants contended that representations were to be implied from the fact that in the negotiations for the APA and the APA itself, Mr Butler and Mr Harding made offers of support by the factory and of services which were contingent upon the continued operation of the manufacturer, including the 5 year “new aircraft” factory warranty, factory pilot training, factory engineer training and certification in South Africa.

It was contended that the following representations of fact were necessarily implicit in those offers:

The Claimants relied by analogy on the fact that similar representations were, so they contended, found to be implied in Lindsay v O'Loughnane [2010] EWHC 529 (QB) at [103] and Spice Girls Ltd v Aprilia World Service BV [2002] EWCA Civ 15 at [52].

I addressed the law on misrepresentation generally and implied representation in particular in my judgment in CRSM v Barclays Bank [2011] EWHC 484. The following paragraphs are of relevance to the present case:

“C. Making a representation

The general test for whether an implied representation has been made is therefore whether a reasonable representee in the position and with the known characteristics of the actual representee would reasonably have understood that an implied representation was being made and being made substantially in the terms or to the effect alleged. The Claimants contended that the alleged implied representations are “necessarily implicit”. Although necessity is not a requirement, in order to establish that an implied representation has been made, proof of necessity or obviousness will usually be important.

The factual basis for the alleged necessary implication of the representations was said to be found in the negotiations for the APA and in the APA itself. However, the uncertain future of Emivest and its continuing ability to provide support was a matter considered and addressed in those negotiations and in the APA, as reflected in the buy-back clause.

The draft agreements, which all precede the signing in August, all contained the type-written buy-back clause, which was a bespoke clause. This clause itself (ignoring the manuscript additions for these purposes) shows that Emivest’s ongoing ability to provide support was a factor which both parties considered before signing of the APA. This was borne out by Mr Foster’s email of 2 June 2011 which stated:

“The reason for the buyback guarantee in the contract we signed was due to the uncertainty of the future of the SJ factory and lack of support for pilot, engineer and spares.”

Where an issue is considered and addressed in the contract itself it is difficult to see why a representation addressing the same or a similar issue should be implied outside the four corners of contract. This is particularly so in a case such as this as both the draft agreements and the APA itself contained an Entire Agreement clause and it was known throughout the negotiations that this was the case.

Further, most of the representations alleged involve representations as to the future (“was unlikely to be incapable”). A representation which speaks to the future is only a representation of fact in so far as it reflects a statement of expectation or belief or of an actual opinion held. However, no allegation of a representation of expectation, belief or actual opinion is made. In so far as the reasonable grounds representation may be said to do so impliedly, the belief relates only to “the facts” in the representations made – i.e. the present facts. Further, if, properly analysed, the representations are limited to the present facts then they are of such restricted scope that it is difficult to discern the alleged necessity for their implication.

In addition, there is no evidence that Mr Foster understood that the alleged representations were being made. Although this is not determinative, since the test of implied representation is objective, as stated in the CRSM case at [221], “one would generally expect it to be reasonably apparent to both representor and representee that the implied representation alleged was being made” and therefore for there to be evidence from the representee that that was his understanding.

The issue is not whether there is any representation which may be implied, but whether the specific representations alleged are to be implied. For all the reasons outlined above I am not satisfied that it has been proved that a reasonable representee in the position and with the known characteristics of Mr Foster would reasonably have understood that implied representations were being made and being made substantially in the terms or to the effect alleged, or that they were necessarily implicit, as is alleged. If that is wrong, I find that the representations are limited to matters of present fact.

It is common in this court to find intricate cases of implied representations being advanced. Often these are more a reflection of the ingenuity of the pleader than reality or the evidence. There is an element of that in this case. The evidence should lead the pleading; not the other way round.

Further, the lack of evidence from Mr Foster that he understood that representations to the effect alleged were being made is highly relevant to the issue of inducement – see the CRSM case at [224]. Unless one understands that a representation is being made it is difficult to see how it can be said to have been relied upon. Mr Foster’s evidence was that had he known at the time that the factory had financial issues he would not have signed the contract. However, the case is one of positive representation, not non-disclosure. He gives no evidence that he understood that the Defendants were representing to him or telling him that the factory had no financial issues, still less that they were making the more specific representations set out in the pleading. I am accordingly not satisfied that inducement has been sufficiently proved.

In any event, even if the alleged representations were made, I find that it has not been proved that they were untrue. This issue falls to be addressed on the basis of the facts up to the time of the making of the APA.

It is correct that by about summer of 2010, Emivest did not itself have the liquid assets to meet its trade debts as they fell due and was dependent upon its parent company, EIDC, for infusions of cash. EIDC was not providing the working capital to allow Emivest to ramp up production and at the same time, it had a burn rate of about $1 million a month. As Mr Mascaranhas said in evidence, Emivest did not have cash but was being fed by its parent company, and indeed this appears to have been the position for some time given Emivest’s failure to achieve significant production. A purchaser for the business was being looked for and CAIGA was expressing serious interest, as reflected by its signing of a Letter of Intent shortly after the APA. .

Despite Emivest’s financial problems the factory was still operating throughout the negotiations. Funding was still being provided, even if Emivest was looking for buyers of the business. Further, Emivest was providing the training and support necessary to keep its Type Certificate and indeed continued to do so even after it subsequently filed for Chapter 11. As stated by Mr Butler in an email to Mr Foster on 22 July 2011:

“The SJ30 factory support was fully maintained throughout the chapter 11 process of Emivest and the factory has now been taken over by a new group of investors who have continued to maintain the SJ30’s Type Certificate and provide training as required…It is important to understand that the FAA closely monitor all jet manufacturer Type Certificate holders closely [sic] and if they ever fall below a minimum standard of support and training personnel for the Type, then they suspend the Type Certificate. This has never happened for the SJ30.”

Turning to consider the specific representations alleged, as to the going concern representation, at the time of the signing of the Agreement Emivest was a going concern, albeit one dependent on continued funding being provided. The factory was still operating and it was continuing to provide necessary training and support. Further, CAIGA were expressing a serious interest in taking over the factory, to the point where, four days after the Agreement was signed, CAIGA signed a Letter of Intent stating that US$20 million would be offered for the equity in the factory.

As to the warranty and the training representations, at the time of the APA training and support was still being provided. Given the importance of maintaining its Type Certificate it was likely that everything possible would be done to continue to do so, as indeed proved to be the case. Even after the Chapter 11 process started, two months after the APA was signed, the support and training continued, even if the production line had been halted. As noted in Mr Butler’s email above, if the FAA had concerns about support they would have suspended the Type Certificate. This never occurred.

As to the registration representation, the factory was and would be likely to continue to be capable of demonstrating to the South African CAA that it could provide support for the aircraft necessary to achieve registration, especially given its ability to continue to meet FAA type requirements.

As to the pilot representation, there were sufficient pilots and the factory was likely to be capable of continuing to supply such training. The only issue with training in relation to single pilot rating arose in February 2011 when it turned out that the relevant examiner could not go on an FAA approved course until mid-March, and there is no realistic way that the Defendants could have known this in 2010. In any event, and in relation to pilot training in general, the Claimants never actually hired a local full-time pilot and so the issue of provision of pilot training never in fact arose.

As to the reasonable grounds representation, if, as found, the representations were true then there were necessarily reasonable grounds for the alleged belief. To the extent that they were not true, the reasons for finding them to be true provide reasonable grounds for believing them to be true. In particular, at the time of the APA it was known that CAIGA was a serious prospective purchaser with the intention of properly ‘ramping up’ production. There was no reason to believe that the CAIGA bid was not serious and thus no reason to suppose that the factory would not continue to provide support – as in fact it did, and does to this day.

For all these reasons the Claimants’ case on the Emivest representations fails.

The buy-back guarantee was included at the request of the Claimants. Mrs Foster had noted that Cessna were offering a “no worries” buy-back programme and wished to have something similar. Mr Foster then raised this with Mr Butler and referred him to the Cessna advert.

The Cessna advert stated that if a purchaser decided to return an aircraft for any reason within two years of delivery Cessna would buy it back for up to 100% of the purchase price. The advert noted that some basic return conditions would have to be met and that the aircraft would have to be enrolled in various programmes. In fact there were a number of detailed conditions attached to the offer, but the parties were not aware of these.

A buy-back guarantee was accordingly included in the various draft agreements and the APA itself. This guarantee was conditional upon it being impossible for the aircraft to be maintained in an airworthy condition. I accept the evidence of Mr Butler that this reflected Mr Foster’s concern about the factory’s ability to provide on-going support for the aircraft, as confirmed in Mr Foster’s own email of 2 June 2011.

On the day of signing of the APA Mr Foster asked his wife to check the agreement before signing it and she said she wanted it changed. This led to the manuscript amendment agreed before the signing of the APA, after Mr Butler had consulted Mr Harding by telephone and obtained his agreement.

The typed clause provided:

“BUY BACK GUARANTEE

In the unlikely event that the manufacturer, Ernivest Aerospace ceases to provide ongoing SJ30 support to its customers and the Aircraft is not possible to be maintained in an airworthy condition by any other party. Action Aviation, for a period of 2 years from ownership transfer of the Aircraft, agrees to buy back N7SJ SJ30 SN007 for a price of $4,500,000 less 1% per month from the date of ownership transfer.

This offer is also subject to the Aircraft being kept in a hangar and away from the environment. Failure to hangar the aircraft will affect the buy back figure if the aircraft needs repainting or other environmental rectification work.

All items listed in Appendix B are included in the Buy Back Guarantee and are to be returned to Action Aviation.

If Action Aviation still owns the traded-in Mustang, that will be returned to the Buyer as part of the buy back at a price $2,300,00 less 1% per month from the date of ownership transfer.”

The manuscript clause provided:

“BUY BACK CONT……

AT ANY TIME FROM PURCHASE OR COMPLETION DATE, [ACTION AVIATION] WILL BUY BACK [THE AIRCRAFT] FOR THE PRICE OF $5,000,000 LESS 1% PER MONTH OF OWNERSHIP. IF [THE AIRCRAFT] IS SOLD FOR MORE THAN DEPRECIATED VALUE [ACTION AVIATION] WILL SPLIT 50/50 ON THE DIFFERENCE AND RETURN THIS TO THE BUYER.”

The Claimants’ case was that the manuscript amendment was a distinct and free standing provision that provided an unconditional “no worries” or “no quibble” buy-back guarantee.

They submitted that:

The Defendants submitted that a number of factors militated against the construction of the manuscript clause as a separate stand alone clause. In particular:

I prefer the construction of the Defendants for the reasons given by them and in particular the following:

The Defendants’ construction accords with general principles of construction. As stated in Lewison on The Interpretation of Contracts (5^th edition) at para.9.13:

“The court is reluctant to hold that parts of a contract are inconsistent with each other, and will give effect to any reasonable construction which harmonises such clauses”.

The court should accordingly strive to avoid or, failing that, to limit so far as possible any inconsistency.

On the Defendants’ construction the inconsistency is limited to the starting price and the period of exercise. Otherwise the clauses can be read together and in harmony. On the Claimants’ construction the inconsistency in effect spreads to the whole of the typed clause since it is rendered entirely redundant.

The Claimants sought to limit the extent of inconsistency by suggesting that the manuscript clause could be read as being subject to qualification in the second part of the typed clause – i.e. those dealing with hangarage and the return of the Mustang. In this connection they referred to Bingham LJ’s statement in Pagnan v Tradax [1987] 2 Lloyd’s Rep. 342 at p350:

“It is a commonplace of documentary construction that an apparently wide and absolute provision is subject to limitation, modification or qualification by other provisions”.