McCandless Aircraft LC v Payne & Anor

Mr Timothy McCandless (“TM”) was the President of the Claimant (“MAL”), which carried on business as a dealer and broker in small aircraft. TM was introduced to Mr Geoffrey Payne (“GP”) and his son Andrew (the First Defendant) (“AP”) in 2006 through mutual friends for the purposes of the transaction which is the subject of this action. The introduction was through fellow members of a church of which both TM and GP were members. The result of the introduction was that MAL bought a helicopter (“the helicopter”) in September 2006. MAL shipped it to England under an arrangement with the Defendants which is in dispute. It is common ground that the helicopter was to be sold by AP. It was not sold in the UK. After the issue of these proceedings on 1 July 2009, the Defendants or one of them delivered the helicopter up to MAL pursuant to an order of this court. The helicopter was sold by MAL in the USA on 10 May 2010 (a few weeks before the start of this trial). That is nearly four years after the parties first discussed the transaction. By that time MAL had incurred substantial interest charges in respect of the bank loan by which it funded the purchase of the helicopter. And the Defendants had incurred expenses on shipping, storage, repairs and other matters.

The transaction was a financial disaster. MAL’s claim is that it paid a price of $242,500 to purchase the helicopter and that the interest charges it incurred are of the order of $90,000, making a total cost to it of the order of $330,000. It has recouped $180,000 on the resale, making a difference of the order of $150,000. MAL claim that its loss is greater than that. It claims that the transaction was a sale to AP, and it claims the price of $265,000 (a further $22,500 over and above the price it paid). The Defendants deny any liability to MAL and counterclaim for the expenses which they quantify at a net figure of £104,013.52 (about $156,000 at today’s exchange rate). The counterclaim is for breach of contract, alternatively in restitution. The combined loss claimed by both the parties is thus of the order of $300,000. This exceeds the purchase cost of the helicopter in 2006.

Neither party has pleaded or proved on any provision of the law of Iowa, or of any law other than English law. The applicable law is therefore English law.

When goods are delivered by the owner to a recipient with a view to sale to a third party there are potentially a number of possible legal relationships between the owner and the recipient. In Benjamin’s Sale of Goods 7^th ed at para 1-084 the editors give some of the possible alternatives. The recipient may be an outright buyer, or he may take the goods as a bailee who may elect to buy (for example on sale or return). Another alternative is that the recipient may be the owner’s agent, or together they may be parties in a joint venture. The editors note that in a sale there may be an agreement for the owner to retain title until the sale to a third party.

MAL’s case is that in this case the relationship is that of seller and buyer under a contract of sale with a provision for MAL to retain title until resale to a third party, such sale to be within 6 months of the arrival of the helicopter in England. Failing such sale AP was to pay for the helicopter himself. And AP was to pay interest in the meantime on the loan from the bank by which MAL had financed the purchase of the helicopter. But they have not been completely consistent as to the terms of the of sale contract.

The Defendants have canvassed a number of alternative relationships at different times. The Re-Amended Defence and Counterclaim lacks clarity on this important point. What is clear is that the Defendants allege that the relationship at least included one of bailment, the Second Defendant being the bailee of the helicopter as from its arrival in England on 15 February 2007 by a new agreement said to have been reached at that time. The Defendants allege that

“the Second Defendant was entitled to retain possession of the helicopter indefinitely in order to market and effect a sale of it to a third party in the UK and thereby recoup the shipping costs which it had paid and seek to make a profit”.

Earlier in the statement of case the Defendants allege a term that

“if there were any net profit from the sale of the helicopter (after deduction of costs and expenses) it would be split equally between the Claimant and the Second Defendant”.

In addition the Defendants allege that there were terms of the agreement as to the description and condition of the helicopter (which MAL breached), and that the Defendants were entitled to be reimbursed by MAL for the costs of shipping the helicopter to the UK, and for any other costs and expenses which were incurred in connection with the maintenance, marketing and sale of the aircraft in the UK market. In the skeleton argument for the Defendant, and in the oral evidence of AP, it was contended that the agreement was that if the helicopter were not sold within 12 months it would returned to the USA. The Defendants have also referred to themselves as agents of MAL.

It can be seen that the Defendants’ case that there was a bailment or agency under which they were entitled to sell the helicopter to a third party while title remained with MAL is not of itself inconsistent with MAL’s case that there was a sale subject to a retention of title. The inconsistency would arise only if the relationship were one of agency and no more (“mere agency”). As the editors of Benjamin state in para 1-049, to determine the nature of the transaction, the whole agreement must be looked to. Certain stipulations may be consistent with both sale and mere agency. But it is evidence towards a sale that the recipient is entitled to sell at whatever price he thinks fit, accounting to the supplier only for a predetermined sum. The nature of the recipient’s obligation to account to the owner is said to be perhaps the strongest indication of his position: if he is bound to furnish particulars of his sales and customers, he is probably an agent and no more; if not he may be deemed to be selling to his own customers. It is to be noted that the Defendants do not plead, and have not alleged in contemporaneous documents, that the agreement included any obligation on their part that they had to obtain the approval of MAL to a sale price, or that they had had to furnish particulars of customers.

Any contract of sale must contain a provision (express or implied) as to the price, the time at which property and risk will be transferred and other matters. Under the Sale of Goods Act 1979 provision is made as follows:

“5 Existing or future goods

(1)

The goods which form the subject of a contract of sale may be either existing goods, owned or possessed by the seller, or goods to be … acquired by him after the making of the contract of sale, in this Act called future goods…

(3)

Where by a contract of sale the seller purports to effect a present sale of future goods, the contract operates as an agreement to sell the goods.

8 Ascertainment of price

(1)

The price in a contract of sale may be fixed by the contract, or may be left to be fixed in a manner agreed by the contract, or may be determined by the course of dealing between the parties.

(2)

Where the price is not determined as mentioned in subsection (1) above the buyer must pay a reasonable price.

(3)

What is a reasonable price is a question of fact dependent on the circumstances of each particular case.

17 Property passes when intended to pass

(1)

Where there is a contract for the sale of specific or ascertained goods the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred…

19 Reservation of right of disposal

(1)

Where there is a contract for the sale of specific goods or where goods are subsequently appropriated to the contract, the seller may, by the terms of the contract or appropriation, reserve the right of disposal of the goods until certain conditions are fulfilled; and in such a case, notwithstanding the delivery of the goods to the buyer, or to a carrier or other bailee … for the purpose of transmission to the buyer, the property in the goods does not pass to the buyer until the conditions imposed by the seller are fulfilled…

20 Passing of risk

(1)

Unless otherwise agreed, the goods remain at the seller's risk until the property in them is transferred to the buyer, ….

(3)

Nothing in this section affects the duties or liabilities of either seller or buyer as a bailee … of the goods of the other party”.

Commenting on s.20(3) the editors of Benjamin note that where the property in the goods remains in the seller, and they are at his risk, but possession of them is delivered to the buyer, the buyer must nevertheless take reasonable care of the goods: para 6-026. The editors also write that the burden of proving that the loss was not caused by failure to take reasonable care would appear to rest on the bailee: see para 6-029. The “buyers” in these passages would mean whichever of the Defendants in this case is the buyer, if the legal relationship is a conditional sale, as alleged by MAL.

Unless otherwise agreed, the place of delivery under a contract of sale of goods to be exported is delivery to the carrier that is to the ship and the buyer must pay for the carriage and insurance. The Sale of Goods Act provides:

“32 Delivery to carrier

(1)

Where, in pursuance of a contract of sale, the seller is authorised or required to send the goods to the buyer, delivery of the goods to a carrier (whether named by the buyer or not) for the purpose of transmission to the buyer is prima facie deemed to be a delivery of the goods to the buyer.

(2)

Unless otherwise authorised by the buyer, the seller must make such contract with the carrier on behalf of the buyer as may be reasonable having regard to the nature of the goods and the other circumstances of the case;….

(3)

Unless otherwise agreed, where goods are sent by the seller to the buyer by a route involving sea transit, under circumstances in which it is usual to insure, the seller must give such notice to the buyer as may enable him to insure them during their sea transit; and if the seller fails to do so, the goods are at his risk during such sea transit”.

The Sale of Goods Act also provides the remedy to a seller where title has not passed and the buyer does not accept and pay for the goods:

“50 Damages for non-acceptance

(1)

Where the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may maintain an action against him for damages for non-acceptance.

(2)

The measure of damages is the estimated loss directly and naturally resulting, in the ordinary course of events, from the buyer's breach of contract.

(3)

Where there is an available market for the goods in question the measure of damages is prima facie to be ascertained by the difference between the contract price and the market or current price at the time or times when the goods ought to have been accepted or (if no time was fixed for acceptance) at the time of the refusal to accept.”

If the legal relationship between the parties is that the Defendants or one of them is an agent and bailee but not a buyer, then the law relating to agency applies. The duties and liabilities of a principal to an agent include the reimbursement of expenses incurred in the course of the agency, at least in certain circumstances. For example an agent is not entitled to reimbursement in respect of expenses which are incurred solely in consequence of his own negligence or default: see Bowstead and Reynolds on Agency 18^th ed Arts 62 and 63; Goff and Jones on Restitution 7^th ed ch. 1. It is on this basis the Defendants counterclaim. An agent’s claim may be in contract, if the agency is contractual, or in restitution. The duties of a bailee, and the burden of proof, are as set out above in paras 6-026 and 6-029 of Benjamin.

Whether the legal relationship between the parties was a sale or a mere agency (but a contractual one), the seller or principal would be bound to supply goods in accordance with the agreed description and within the agreed time (or a reasonable time if none were agreed). So if the helicopter was not in accordance with an agreed description whether because it was a Clipper or because it was not in good condition, or if the helicopter had been shipped later than the time agreed time for shipment, AP would have had the contractual right to reject the helicopter. Having accepted the helicopter, whichever Defendant is the contracting party would be entitled to claim damages as a remedy for breach. But the Defendants do not advance an alternative counterclaim on the basis that the court might find there was a sale.

If there were no binding agreement at all, then AP would have been entitled to refuse to accept delivery of the helicopter at any time before he took delivery of it, without giving a reason. Neither he nor EAL was obliged to become a bailee or agent unless they agreed to do so. But then AP could not complain of breach of agreement as to description or condition, if his case is that there was no agreement.

MAL does not advance an alternative case in contract for breach by the Defendants of their duties on the basis that the court might that there was an agency or bailment. But MAL does advance a claim in conversion in respect of what it alleges was the unauthorised use of the helicopter for charters (it is not in dispute that it was chartered) and for the failure to deliver up the helicopter when required to do so.

There are a number of points on which the parties agree. They agree that the property in the helicopter remained throughout with MAL. In their statements of case they both claim that there was an agreement made orally in Iowa in August 2006. But the Defendants claim that it was varied by letters dated 17 February and/or 31 May 2007, and by the conduct of EAL in accepting the helicopter on about 17 February. They agree that the helicopter is the model called a “Clipper”, which is similar to the model called a “Raven”, except that the Clipper has floats. The floats make the helicopter suitable for use over water, but there is a price in terms of performance for this extra facility. The addition of the floats means that the helicopter is heavier, and thus has a reduced payload or range, and some additional maintenance costs. Neither party alleges that the other is personally responsible for the delay of some 5 months before the helicopter arrived in England.

The main issues between the parties are:

On 25 March 2009 solicitors for MAL formally demanded delivery up of the helicopter. On MAL’s case that had the effect of terminating the conditional sale contract, in that MAL thereby accepted the breaches by AP in failing to pay interest and to sell the helicopter or buy it himself after the expiry of 6 months. In the Defence it is contended that MAL was not entitled to terminate, and this was a repudiatory breach by MAL of, any contract there might be between the parties. But in the Defence it is also pleaded that as at that date, 15 September 2009, EAL accepted MAL’s repudiation as terminating the agreement between them.

Accordingly the parties agree that any contract between them was at an end by 25 March, alternatively 15 September 2009 at the latest.

TM had been an aircraft broker for 30 years dealing only in fixed wing aircraft, and never in helicopters. He has sold over 1000 fixed wing aircraft in his career. MAL is a company incorporated in the state of Iowa, USA, which had premises at Waterloo airport, Iowa. TM owned MAL.

In 2006 AP was in the process of obtaining a qualification to fly helicopters. But neither GP nor AP had any other previous experience of helicopters, and neither had dealt in any kind of aircraft. GP had retired from business as a chartered mechanical engineer. AP has at all times been in business supplying heating systems. He is director of a company called Atmostherm Service Ltd. Neither of them had any experience of international trade.

EAL was incorporated on 15 February 2007. AP is a director and controlling shareholder of EAL. The principal activity of EAL is stated to be the provision of helicopter flying time. EAL was a shell company and lay dormant for year ended 28 February 2008. Its accounts record no assets or turnover for that period. For the year ending 28 February 2009 its accounts show sales of £5,364, which AP explained as income from charters. Costs of sales are recorded at £44,568. Most of this is attributed to Repairs. The director’s loan account is in credit in the sum of £47,965.57.

The introduction of GP to TM led to telephone conversations in about July 2006 between them and between GP and Mr Roloff (“PR”), Vice-President and Sales Manager of MAL. In August 2006, there followed a visit by GP and AP to Iowa. GP was able to date this from his passport as about 23 August. There they met TM and PR. PR has been involved in the purchase and sale of aircraft since 1997.

For much of the time that GP and AP were in Iowa TM was away from home and they were being entertained by TM’s sons. The business of the helicopter was discussed during a meeting with PR. TM was present during that meeting, but he was at the same time attending to other matters by telephone and e-mail.

About two weeks after that meeting, on about 6 September 2006, MAL bought the helicopter. The helicopter is a 1999 Robinson R44 Clipper Serial no 0689. The helicopter was located in Puerto Rico. The seller was Montesol Enterprises. It was sold through brokers Caribbean Aviation Maintenance Corporation (“Caribbean”).

The helicopter was dismantled and, on 13 December 2006, it was shipped in a container for transport to England.

After some delay the helicopter arrived in England on about 15 February 2007. It was re-assembled and registered in the name of AP, with a new UK registration number. The purpose and role of EAL is a matter of dispute. In the Re-Amended Defence and Counterclaim it is alleged that, as evidenced by letters from PR dated 17 February and 31 May 2007 it was agreed between the parties that EAL be substituted for AP as the contracting party, and that thereafter AP acted only as agent for EAL. In other words the case is that there was a novation.

On 1 July 2009 MAL issued proceedings claiming what it alleges is the price of the helicopter pursuant to a conditional sale agreed orally made in 2006, alternatively damages for breach of contract, alternatively for conversion, together with interest which is said to be $65,504.07 as at 14 July 2009. The only material condition of the sale is a retention of title provision. MAL also claimed delivery up, and delivery up was made pursuant to an interlocutory order of this court dated 24 June 2009.

So far as this case is concerned MAL was represented solely by TM and PR. In 2006 MAL had a turnover of about 40 to 50 airplanes per year, all with fixed wings, and with an average value of $175,000 to $200,000 each. The description of the business given on a website in 2010 is applicable for 2006 also, as follows:

“[MAL] specializes in the purchase, sale and brokerage of general aviation aircraft all over the world. Our professional and experienced staff is eager to help you with any and all of your aircraft needs. Our Central Iowa location allows us easy access from all parts of the United States and the world. McCandless Aircraft has contacts in all four corners of the globe... whether an aircraft needs to be bought or sold in Canada, Europe, Asia or the Far East, McCandless Aircraft can get the job done. Our extensive network of American and International dealers and contacts can make any deal possible. We pride ourselves in our quick response either in buying or selling and we have an attitude of no job too big or too small. Straight talk and a no nonsense approach along with personal service is what you can expect from McCandless Aircraft.

A full service avionics shop is located with us here in Hampton Iowa (HPT).”

The company has since been sold to a Mr Swieter, or company associated with him. Mr Roloff continues to work for the business under its new ownership. But the helicopter was not included in the sale to Swieter, and PR has continued to represent MAL in relation to this helicopter.

According to TM’s witness statement the initial telephone calls between the parties about a helicopter were not with TM. Although GP called TM, it was one of his sons who took the call. TM understood that AP was obtaining his helicopter pilot’s licence and was interested in trying to sell helicopters in the UK, where, as AP believed, there was a shortage and a ready market. TM asked PR to deal with GP’s enquiry. MAL had arrangements with dealers in Europe, in particular one in Germany and one in France. TM discussed the matter with PR and they agreed that MAL should be willing to consider offering a similar arrangement to GP. PR knew that the introduction of GP to TM had come through TM’s church and it soon became obvious to him that GP did not have experience in dealing in aircraft.

As described by TM, the arrangements with dealers in Europe involved MAL in effect bank rolling the dealer by buying their selected aircraft in the US (or supplying existing stock) and having them taken to Europe for dealer to sell on his own behalf. MAL would simply want a fixed price, which would be its (undisclosed) buying price plus a margin. It was for the dealer to obtain a price that covered this plus the dealer’s expenses, including the cost of sending the aircraft to Europe, the certification costs, insurance, maintenance and marketing costs. The excess would be the dealer’s profit. MAL were able to do this because it had lines of credit with its bankers totalling about $2.5m. This provided funding for MAL to take aircraft into stock for onward sale. The banks did not require a charge over every aircraft on which they advanced funds, but they did need to be kept informed of MAL’s stock position.

No documents relating to any such arrangement with other dealers are before the court. But representatives of the German and French dealers made short statements which were admitted in evidence without any cross-examination being required. The German dealer states that between 1995 and 2003 his firm entered into three or four such transactions with MAL. He states that the agreement was that if his firm had not found a buyer within six months, his firm would pay MAL at that stage. The representative of the French dealer states that her firm has purchased 80 to 100 fixed wing aircraft from TM and PR over the past 20 years. Most of these were done on terms such as described by TM in his statement. She does not mention a 6 month period, but states that her firm had a finite time in which to sell the aircraft, and would purchase it if it had not been sold within that period.

What TM said to GP and AP about the helicopter business was limited. He says in his witness statement that he and PR said them that he and PR did not have any experience in the helicopter market. According to his witness statement that is the only statement TM made to them. According to his witness statement the rest of what he knew of the discussions was what PR told him. TM says in his witness statement that the whole transaction was based on the trust he had in the Paynes and the fact that title to the helicopter would remain with MAL until MAL was paid.

There are print outs of web pages relating to the helicopter dated 14 July and 23 August 2006. Both printouts misdescribe the helicopter as “1999 Robinson R44 Raven I”. The one dated 14 July covers two pages. It gives the serial number of the helicopter and bears remarks handwritten by PR about the price that MAL agreed with the sellers in Puerto Rico. He says he did not show this to the Paynes, and AP agrees that he did not. GP thought that he had seen a copy of the print out, but not the handwriting before he went to Iowa. The print out dated 23 August 2006 is only one of two pages, but this one bears handwriting by GP:

“PRICE $265,000 American Dollars”.

GP states gave evidence that he saw it at the meeting in Iowa and the price he wrote down is the price that PR and TM were asking for the helicopter at the meeting. AP could not remember that, but I accept the evidence of GP on this. But AP did agree that they had asked for $265,000. He said that he did not agree to that figure.

After the meeting in August 2006 TM understood from PR that AP had chosen a Robinson R44 helicopter that PR had found to be for sale in Puerto Rico and that PR negotiated a price of $245,000 to be paid by MAL to the sellers. TM went to Puerto Rico to see the helicopter and check its documentation. He found it in the possession of Caribbean Aircraft Maintenance Corp (“Caribbean”). He verified its ownership by searching the registry of the US Federal Aviation Administration (“FAA”). He flew in the helicopter and carried out a visual inspection. He inspected the servicing documentation, which seemed to be in order. The helicopter had had a full annual inspection only 2 months or so before for the renewal of the FAA Certificate of Airworthiness. He agreed a reduced price of $242,500, put in hand the registration of the helicopter in the name of MAL and remitted the price to Caribbean in exchange for the bill of sale. There is an undated version of this document with markings indicating it was faxed on 5 September 2006. TM states that that is the only record of this sale, and that to have no other record of a sale is not unusual in aircraft sales of this sort of value in the USA. He then left it to PR to deal with the shipping arrangements.

There are in the bundle over 60 pages of e-mails exchanged between the Paynes and MAL dated between 1 September 2006 and 10 March 2008. But it is an e-mail of that date, over 18 months later, which is the first sent by TM. This is in response to an-email from GP. In that e-mail TM wrote:

“… I think we made it clear that 6 months was our endurance”

TM says in his statement that in 2008 he became concerned about the accumulating interest costs at the bank, and by that time the recession was beginning.

TM made a second witness statement dealing with his arrangements with his banks and the interest MAL is claiming in this action. I shall return to that topic later.

In his oral evidence in chief TM said that at the meeting in Iowa he told GP although he and PR knew nothing about helicopters, they did know about title to airplanes and could help with that. He said in oral evidence that MAL required payment in six months, whatever else was agreed with PR, and that GP did not disagree. He said he dealt with just those three matters: that they knew nothing about helicopters, that they could help with title, and that they required payment within 6 months whatever else was agreed.

In cross-examination TM said that in 2006 he did not know what either of the Paynes did for a living. He said that he had agreed with GP that the Paynes would pay interest when the bank started asking him what was happening with the helicopter.

I accept that TM was doing his best to tell the truth. But I find that his memory of events is unreliable. I accept what I have cited above from his first witness statement is correct. But I do not accept that he can remember whether or not in 2006 he mentioned to the Paynes either a 6 months time limit for the sale of the helicopter or who would bear the interest costs.

PR in his witness statement states that he first spoke to GP in July 2006 after TM had led him to understand that AP wished to begin trading in helicopters in the UK. PR states that he told GP that MAL usually supplied aircraft to European dealers. That this involved MAL bank rolling the dealer while the dealer marketed the aircraft. If AP wanted to take up this proposal, MAL would fund the acquisition of the aircraft that was agreed upon, on condition that, if AP did not sell the aircraft within 6 months of its arrival in the UK, AP would purchase it himself. MAL would source the aircraft and MAL and AP would agree the price MAL was to receive. When this was agreed, MAL would purchase the aircraft and arrange its shipment to the UK. AP would be required to bear the cost of the shipping and all of the costs incurred in putting the helicopter on the UK register, and running it until sold to a third party. AP would also bear the monthly interest MAL incurred in borrowing the purchase monies. AP would retain whatever profit was left after paying the agreed price to MAL and the expenses and interest. RP spoke to GP by telephone on several occasions while locating Robinson R44 helicopters which were for sale. He made clear to GP that MAL dealt only in fixed wing aircraft and had no specialist knowledge of helicopters. He asked GP whether AP might be able market fixed wing aircraft in the UK, and GP said he would be interested in discussing this.

PR’s witness statement included an account of MAL’s banking arrangements similar to that given by TM. PR added that if MAL were not able to sell an aircraft within 12 months, then the banks would express concern.

PR states that the Paynes were brought to his office and he had one lengthy meeting with them before taking them to lunch. TM was present during most of the meeting but did not fully participate because he was engaged in other matters.

At the meeting PR states that they discussed the opportunities for a sale of a R44 helicopter. But they also discussed the possibility of AP selling 2 Cessna 172 fixed wing aircraft in due course. Various available helicopters were discussed and of these the one with serial number 0689 was chosen as being the one that MAL should seek to purchase. MAL have produced a copy of a print out made in July 2006 from the website of Globalwings. AP agrees he was shown a printout, but does not believe that it was a print out in that form that he was shown. PR states that he did not mention the buying price which he had already negotiated with Globalwings. He and the Paynes agreed that AP would pay MAL $265,000 when he sold the helicopter, or after 6 months if he had not sold it by then. They also agreed that when it arrived in the UK the helicopter would be registered in the name of AP, because the regulations did not permit registration in the UK in the name of US company.

PR agrees that the helicopter discussed at the meeting was referred to in the print out as a Raven, but it turned out to be a Clipper.

On 1 September PR e-mailed GP to tell him that MAL had made payment for the helicopter. He reported that TM said it was

“beautiful … like new inside and out”.

PR informed GP that he had wired the seller funds that day. He said that he had started to make arrangements for the Certificate of Airworthiness inspection, disassembly, and shipment. He said that later he would quote for the fees for these operations, and send a schedule to get the helicopter to the UK. He asked for reimbursement of TM’s expenses for his trip to Puerto Rico in the sum of $735 (and AP did reimburse these). He said that he had prices for the helicopter, and for 2 Cessnas, and he gave the figure of $265,000 for the helicopter. He ended saying that:

“We will do everything we can to get these over to you quickly and you can get them to your customers in a timely fashion”.

The e-mail also gives prices for two Cessna aircraft, one of which PR said was awaiting inspection in MAL’s hangar and one of which was due to arrive there.

On 18 September PR wrote a further e-mail to GP saying that the Paynes needed to get insurance for the helicopter showing MAL as the loss payee, and that TM was surprised that they had not already done that.

In his oral evidence in chief, PR gave an account of what had been discussed and agreed that was consistent with his written statement as to what he had discussed with GP. But in his oral evidence he stated that it was at the meeting in Iowa that he had said that AP would be responsible for paying the shipping and other costs and the monthly interest, and that the Paynes accepted this. He said that at the meeting he explained that his proposal was to do what MAL did with other European dealers, and that AP would buy the helicopter himself if he had not sold it within 6 months. He said that the Paynes seemed to understand and agreed. He said that GP said that he had decided to come out of retirement to help AP in his aircraft sales venture.

In cross-examination PR maintained his account of what had been agreed between him and the Paynes. He said he did not enquire in to the ability of the Paynes to pay for the helicopter because TM had introduced them to him as friends who had come through his church. In that respect it was not a normal deal.

PR was cross-examined on the three different versions of the agreement that are pleaded respectively in the Particulars of Claim and in the Amended and Re-Amended versions of that document. A significant difference is that in the Amended version it is pleaded that the agreement was that MAL would buy the helicopter for $240,000, that AP would pay a mark up of $20,000, and that the total of $260,000 would be payable to MAL by AP when the helicopter was sold, or within 6 months of the helicopter’s arrival in England, if AP was unsuccessful in effecting a sale to a third party within that time. The Re-Amended version reverts to an agreed price of $265,000 and omits the reference to the $20,000 mark up on $240,000. Further, the original version is ambiguous as to whether the $265,000 was the price that it was agreed MAL would pay to the seller, or the price AP would pay to MAL. The Re-Amended version removes this ambiguity.

PR insisted that his witness statement was correct, and that no mark up was discussed, nor the price to be paid by MAL, but that it was agreed that AP would pay $265,000 to MAL if the helicopter had not been sold within 6 months of its arrival in England.

Where as here there is a conflict of oral evidence between the parties the court pays particular regard to the contemporaneous documents. The court considers what version of events is most consistent with those documents and with the agreed facts. I shall consider next the contemporaneous documents and agreed facts and return after that to consider the evidence of AP and GP.

On 19 September 2006, about three weeks after the meeting, there appeared for the first time in the documents a difference of understanding which eventually became the present dispute. In response to PR’s e-mail of 16 September saying that GP needed to obtain insurance cover, on 19 September GP wrote :

“… I am sure that Tim and yourself do understand that the aircraft business is new to us and therefore any advice and help you can give is appreciated.
Perhaps we should have gone into the requirements of the authorities and yourselves in greater detail during your visit. Could you confirm if there are any other matters we need to look into at this stage…”

On the same day PR replied:

“When we have done this in the past with European dealers, the insurance is their responsibility. Sorry we didn’t make that clear when you were here. You were here such a short time that we must have not discussed it. Again sorry for the confusion…”

I interpose to note that there is a significant difference in the exportation of aircraft from the USA to Europe depending upon whether they are fixed wing or helicopters. The difference is both practical and legal. The fixed wing aircraft exported by MAL were flown to their destination. The helicopter had to be boxed and shipped. Unlike an aircraft which can fly to its destination, in legal terms the export of a helicopter is little different from the export of any other goods. So if parties familiar with international trade in goods other than fixed wing aircraft (or ships) were negotiating a sale, they might be expected to discuss the conventional forms of contract used in international trade, such as FOB terms (see Benjamin 20-001). These conventional terms delimit responsibility and set out which party bears the risk at a given point in time. Neither party in this case made any mention of such terms, or of any legal terms. But the fact that MAL found the shipping space, but required AP to pay for the shipping, is consistent with a FOB contract, and with the general rule under the Sale of Goods Act.

In the same e-mail of 19 September GP asked PR for documents that MAL would use in making a sale. In his response the same day PR attached a form of purchase agreement saying that that is what MAL use in Iowa. That is an 18 page standard form. PR confirmed that the copy in the bundle was MAL’s standard purchase agreement, and that copy appeared to have been what was attached to the email. It would have been easy for PR to have asked AP to sign such a form, with or without amendments, but no such request was made.

The form includes an exclusive choice of Iowa jurisdiction, but as already stated, neither party has contended before me the relationship between these parties is governed by Iowa law. The standard form uses language very similar to that in the Sale of Goods Act, which is derived from the common law. It provides:

5.

Title and Risk ….Title to the Aircraft shall pass to Purchaser when the full purchase price is paid to Seller. Risk of damage to the loss of the Aircraft shall pass to Purchaser upon the earlier of the transfer of title, or on the receipt by Purchaser of possession of the Aircraft”.

Insurance was obtained by AP in the name of EAL, but not until many months later, and even then the policy documents did not refer to MAL’s title, or identify MAL as a payee. There is a note from brokers in England dated 31 May 2007 that cover from an insurer Haywood Aviation Ltd was effective from 13 June 2007. There is a Certificate of Insurance from that insurer dated 30 October 2007 for the period from 23 August 2007. Asked about these documents AP said he did not recall the e-mails and did not understand about insurance. If the helicopter was insured from September 2006, I have not seen evidence of that. I think it likely that the helicopter was not insured by AP before 23 August 2007.

But whether or not the Paynes obtained the insurance requested by PR in September 2006, they did not dispute the request, and did not rely upon the request for insurance at the time as a breach of, or as being inconsistent with, the agreement between the parties.

On 2 October 2006 GP did raise an issue as to the nature of the agreement between the parties and the price of $265,000. The email refers to the Bluebook. The Bluebook describes itself as a service to assist purchasers in arriving at the fair market value of aircraft. The prices given are considered to be a representative average, and do not reflect the value of any particular aircraft.

GP wrote:

“Your prices with all the additions are now not competitive for the UK market.

Your prices as quoted are higher than the Bluebook retail prices surely this cannot be right, if we are going to be partners we should be getting prices nearer to the wholesale prices. Andrew and I were under the impression from our conversations that our two companies were going to share the overall profit made.

There would be no point in sending the aircraft to the UK if we cannot sell them.

We are still hoping to do business together”.

At this point there is missing page 2 of the 3 page print out of the e-mail string. The next passage that survives is part of an e-mail from PR in which he wrote giving reasons why a UK buyer should expect to pay a higher price. He asserts that AP had agreed the price, as follows:

“It was my assumption that we were going to be your bank and you were going to inventory these aircraft in the UK. I also thought the prices you agreed to were prices that you thought you could inventory these aircraft for and turn around and sell for a profit. Again you know the UK better than me…”

In his response the same day GP did not dispute PR’s assertion that he had agreed the price. Instead he wrote:

“I am not being difficult but I want you to answer my question. Are the prices you have quoted to us retail or wholesale? In our opinion they are the retail prices similar to those in the Bluebook which of course is the guide for prospective buyers in the USA and the UK alike. Our prospective buyer is saying that your price direct to him as a retailer would be reasonably competitive, but of course that gives no profit to us…”

In his reply the same day PR wrote about both the helicopter and the Cessnas. As to the helicopter he wrote:

“… The 1999 R44 Clipper helicopter $265,000 price is wholesale. Retail price is $285,000… Hope this helps…! I want to work with you and Andrew in anyway I can. I agree we need to clarify these things now!”

The next day, 4 October 2006, AP wrote to the manufacturer, Robinson, as follows:

“We are currently purchasing a 1999 Robinson R44 helicopter Reg No N829PM from America and importing it into the UK. Could you e-mail me the helicopter serial number and information as to whether it is a Clipper or a Raven model”.

Robinsons confirmed that it was a Clipper and that the serial number was 0689. With that information AP wrote again to PR. He said he had spoken to Robinsons and gave figures which Robinsons had given him. He said that “Robinson consider this helicopter to be worth $240,000”.

When AP was asked in cross-examination why he told Robinson that he was purchasing the helicopter, he replied that he was not purchasing the helicopter but needed to say that.

On 5 October 2006 GP e-mailed PR with a summary of the same information and said: “Are you being overcharged by the seller?”

On 19 October PR e-mailed GP about both the helicopter and the Cessnas. He wrote:

“Also, the helicopter will be done and signed off this week. Should be able to box and ship end of this week or early next week”.

On 19 October PR wrote to GP. The e-mail is again mainly about the Cessnas. But as to the helicopter, PR asserted that AP had agreed the price together with interest and other costs on top. The e-mail included the following:

“… we do not want to bury you with aircraft you can’t sell. With the expenses of the interest, C of A for export and the ferry, we don’t want you to be in too deep… These 2 [Cessnas] were the ones that you selected when you were here and we went out and bought them to go to the UK. As I mentioned to you the other day, the helicopter is nearly ready to be shipped. Once that arrives hopefully the customers that Andrew has in line are ready to move. This has taken a lot longer than I ever thought it would…inspections, shipping, paperwork, etc As agreed upon when you were here, the interest, inspections and delivery costs will be on top of the prices we talked about. As time goes on, the interest goes up as well. This is where we don’t want to bury you. As they say, time is money! Please give me a call…”

That same day GP sent two e-mails together to PR. The first was asking for TM’s address so that GP could send him a letter about Church matters. The second was about the helicopter, saying

“… you have still not resolved the matter of basic prices to us etc. You will be receiving a letter … fully outlining our feelings. There is no point in arranging for any aircraft coming to the UK at this stage”.

The fact that GP was corresponding with TM on church matters at the same time may explain why each of GP and RP are less categorical than they might otherwise have been in what they said to each other regarding the helicopter.

The letter from GP dated 19 October covers a page and a half and includes 12 paragraphs. It is addressed to both TM and RP and signed by both GP and AP. The Paynes placed much reliance upon it later on, asserting that MAL had not replied to it. In fact PR did reply to it, as will appear. The Paynes wrote on the footing that they were still negotiating with MAL. MAL wrote on the footing that there was an agreement. The letter reads as follows (with paragraph numbers added):

“1.

Further to the e-mails we have sent to you over the last two weeks, regarding the prices of the helicopter and aircraft you are hoping to sell in the United Kingdom as well as other matters. Andrew and I now feel we must clearly outline to you our understanding of your proposed agreement with us in an endeavour to stop any further misunderstanding, before we can continue our relationship.

2.

When I first contacted Tim, I made it known to him that Andrew was in the final process of obtaining his helicopter pilots licence, and that during discussions with the various people he had met at the airfield where he has been training he has made a number of contacts in the aviation world, and the at these people had informed him that there was a real shortage of Robinson type helicopters for sale in the UK.

3.

During my telephone conversation with Tim he also enquired whether or not there was a demand for small fixed wing aircraft such as the Cessna type. After making enquiries I informed him that we had been told that the market for such aircraft was good as there was also a shortage of such aircraft for sale so long as our prices were competitive.

4.

It was after further telephone calls and e-mail letters that we agreed that we should make a visit to Tim McCandless Inc at the The Waterloo Airport with a view to us sitting down with both of you in order that we could work out a relationship that would be profitable to all concerned.

5.

At the meetings held during our visit, we did explain that we were totally new to this business but as the opportunities seem to be so good, I was prepared to come out of retirement so that I could spend a portion of my time in helping Andrew to develop the business for the benefit of both parties.

6.

We understood that you would in turn let us have helicopters and other aircraft at wholesale prices as consignment stock as it was important that we had aircraft available for prospective buyers to see within the UK, and that once they were sold at that point you would invoice us. We were also of the opinion that once the sale had been made we would share the profit.

7.

After further research it would seem that you are offering us the Helicopter and the Cessna type aeroplanes at prices similar to the international retail price list. (See price list attached).

8.

We have become even more confused when after speaking to Robinson Helicopters direct we find that the helicopter you have quoted for is not a Robinson R44 Raven 1, as your specification sheet states but a Raven Clipper which is a less expensive model, even though it did leave the factory with floats and full hydraulics complete, as confirmed by Robinson who have also given us the model and serial number.

9.

Since our visit and meetings we have also found that there are a number of on costs to your price that we were not aware of originally in getting the planes into the UK, particularly in respect of the helicopter. We are still looking for ways to avoid some of these costs.

10.

We are still keen to do business with Tim McCandless Inc as we are still of the opinion that the market is good as long as our marketing price and strategy is right.

11.

Andrew and I would appreciate it if you would also confirm in writing what your understanding of our verbal agreement was if different to that outlined above.

If you feel that you have suggestions to make as to how you feel we can continue to create a better relationship which would be profitable and enjoyable for both parties, we would be pleased to receive these.” (emphasis added)

PR stated in evidence that paras 1- 5 of the letter were reasonably accurate, but para 6 was not. There was no agreement to share profit.

On 27 October there was a conversation between PR and GP. The only evidence of what was said in that conversation is the e-mail that PR wrote on the same day referring to it. It appears that there must have been some meeting of minds at that point, because there is no note of disagreement between the parties in the subsequent e-mails until 23 April 2007, 6 months later, when GP again referred to the letter of 19 October. In the meantime the helicopter had been delivered by MAL and accepted by AP or, as he contends, by EAL. PR’s e-mail to GP of 27 October reads.

“As per our conversation today, the Helicopter and the 172s are ready to go. The helicopters ready for shipment today and the 172 are just awaiting the paperwork from your aviation authority. Please contact me when you hear from Andrew as to what else might be needed. I will check on the helicopter export papers but they assured me it was signed off and ready for importation to the UK.

We have to continue with the process of getting these aircraft to you in the UK. We have gone thru the purchase, C of A inspections and the arrangements for getting them to you …. They are now ready. I am confident that you and Andrew will get them sold at the best possible price. As I understood it, you thought you could sell these aircraft in the UK with the prices we discussed here as your net prices. There are also the interest inspection and ferry costs. Any profit would be yours and Andrews. If I misunderstood this, I apologise. I thought we were on the same page. At this point, we have gone too far to reverse it. We will continue to get the aircraft to you as soon as possible…have you market them at the best possible selling price and work with you as offers and deals come up. In the future, we will be very specific so we don’t have this confusion. I think we both assumed lot of things and weren’t clear. I want to have a relationship with you and Andrew for selling aircraft in the UK.

Please confirm that we will send the aircraft as quickly as possible and as planned, you will sell them as best you can and between us, work the best possible deals to your customers. The UK market will tell us what they sell for.

I hope this spells things out a little better. We will work this out and move on in the future. Again, I apologise for the confusion. The important thing is to get these aircraft to you get them sold as best we can and move on. Please don’t hesitate to give me your feelings on this. We will work this out for sure”. (emphasis added)

A US export certificate of airworthiness was obtained and is dated 26 October 2006. PR arranged for shipment from Puerto Rico to England. A quotation by e-mail dated 27 October 2006 sent to PR was for departure from Puerto Rico on 30 October and arrival at Manchester on 1 December, an estimated transit time of 32 days. In his witness statement PR said that the vessel left Puerto Rico on 13 December. A demurrage invoice from Maersk Line records the sailing date as 16 January 2007 and the arrival date as 15 February 2007. For reasons of which I have heard nothing, the whole process took longer than PR had expected.

On 7 November GP wrote to PR about documents for the helicopter. AP had contacted the authorities in the UK about documents. GP asked PR not to send any aircraft or the helicopter to the UK “until we get approval in writing”. PR’s reply refers to a conversation between himself and AP the previous week in which:

“[AP] seemed to think the approval was not going to be a very big deal. The reason I am trying to speed things along is because the interest on these airplanes and helicopter are clicking right along and I don’t want these costs to bury you. The sooner we can get them there and on the market the better”.

On 9 November 2006 GP and PR again spoke on the telephone, as stated in GP’s e-mail the next day confirming what had he had said. GP wrote about both the Cessnas and the helicopter, as to which he wrote this:

“The CAA [Civil Aviation Authority] have approved the docs for the Helicopter. Address of Robinson Engineer will be sent asap”.

On 16 November GP gave that information by phone to PR, and the next day e-mailed confirming what he had said. He wrote:

“… the address for the helicopter to be sent is:

TK Helicopters
Hawarden Airport … Chester …

Please address the container – For the attention of Mr Tom Kirk Director, I understand he is the Robinson approved engineer to reassemble your helicopter in our part of the UK”.

On 4 December 2006 GP e-mailed PR asking for news of the whereabouts of the helicopter. On 11 December 2006 PR responded with a report of his conversation with people in Puerto Rico who arranged the shipping. He said the estimated arrival time of the helicopter was 20 December. He also asked GP to confirm that he had insurance cover.

Accordingly, it is plain that AP did not refuse to accept delivery of the helicopter. By this stage he had decided to take possession of it.

On 26 December 2006 PR e-mailed GP saying he assumed that the helicopter had arrived in the UK. He then wrote:

“Last week I sent you an email with the $5370 invoice that we paid for the C of A inspection, disassembly and insurance for the shipment of the Helicopter. Also since we have paid for the helicopter approx 3 months ago, the bank has requested we pay the interest that is due. 90 days interest on $265,000 is $5850. This can also be sent along with the $5370”.

This e-mail gave rise to no dispute on the part of the Paynes. On the contrary, some member of the Paynes family subsequently paid $5200 to MAL. And GP replied to the e-mail saying he had heard nothing about the helicopter and that this was most disappointing. He asked for the names of “other customers in the UK that you have sold aircraft to” saying they may be able to help with advice on the paperwork and the CAA. PR replied giving the names and addresses of two individuals in the UK to whom MAL had recently sold Cessnas.

The figure of $5370 is the subject of an invoice from Caribbean to MAL dated 13 December 2006. It includes $2300 for “insurance for fire or total loss”. The other items include disassembly, Export Certificate, packing and delivery.

On 15 February 2007, when the helicopter arrived in the UK, and after that date, there came into existence a number of documents on MAL’s headed writing paper and apparently signed by PR (together with one further similar document dated 17 February 2007 typed in a different typeface and not signed by PR). Each one gives the identifying details of the helicopter. With some variations the text is similar. PR said in evidence and I accept that he signed some of these documents, but not others, and that the ones he signed were in forms which were dictated or requested by the Paynes. He wrote whatever they said they needed.

Until he came to give evidence there was no indication that PR disputed the authenticity of any of these documents. But when he gave evidence he did dispute the authenticity of three of them.

The document dated 15 February 2007 (which also bears a fax header of the same date) is addressed “To whom it may concern”. It is not disputed and reads:

“This helicopter has been shipped to Geoff and Andrew Payne in Manchester United Kingdom via Maersk Lines container #MSKU9596508, Booking #851711991. As the owner of this helicopter, McCandless Aircraft LC is shipping it to them as a sales demonstrator…”

The signed version dated 17 February bears a fax header with the dated 22 February 2007 and is addressed to “Andrew and Geoff Payne of Eminence Aviation”. It is disputed and reads as follows:

“Please accept on our behalf a 1999 Robinson R44 Helicopter. The helicopter is to be reassembled at Chester airport and approved by the CAA. The aircraft will be housed at Barton Airfield, Manchester England and be used for sales demonstrations. The Bluebook price for this helicopter today is £125,000.00 UK pounds and it should be insured on our account. Maersk Lines tell me that the helicopter should be arriving any day…”

The signed version dated 17 February is broadly similar to the unsigned document of the same date with a heading which is not in MAL’s standard form, which is the third of the documents to be disputed by PR. They are the three that contain a value in sterling, and PR said he would not have known how to produce that on his word processor.

These two documents are the first among those exchanged between the parties in which EAL is referred to. EAL was incorporated on 15 February 2007. PR states and I accept that no previous mention had been made of EAL or of any other company, but PR did not question it when asked to sign those of these documents which are not disputed.

There is a further version dated 26 February addressed “To whom it may concern”. This reads:

“As owner of the above referenced helicopter, we approve of Andrew and Geoff Payne of Eminence Aviation LTD, to assume custody and care of the aircraft. It will be based at Flight Academy LTD. At Barton Airfield, Manchester England M3O 7SA.
We understand that once this helicopter is re-assembled, a number of sales demonstrations have been arranged. This helicopter will be in the UK for up to twelve months…”

This is the first reference in the documents to the helicopter being in the UK for up to twelve months. This is also the first reference in the documents to Flight Academy Ltd. That is a flying school, and it is the one where AP received his training. This is also the first of these documents not disputed by PR which refers to EAL.

The background against which these documents came into existence is a letter from Maersk Logistics to GP also dated 26 February 2007. They wrote:

“I have had to change the CPC (Customs Procedure Code) from 530025 to 400044 as we do not wish to pay any Duty and Vat out. Under the revised CPC code however I will require some additional information:
1. the name, place of where the demonstrations will take place
2. It may not be feasible but if you know any demonstration dates”.

The helicopter was released by HM Customs no later than 2 March and delivered to Mr Kirk of TK Helicopter Services Ltd

Mr Kirk wrote a report dated 9 May 2007 on damage he found on inspection of the helicopter when it arrived in England. He reported finding damage to the tail boom paint work, paint on the cockpit roof. He also reported that the main mast cowling had been allowed to spring open during dismantling, causing damage on both sides of the roof area. He reported that the damage took a week to repair. He delivered a bill for this work dated 12 July 2007 in the sum of £2,027.72. This included for replacing the bearing in the main hub, which is not mentioned in his report. The invoice was addressed to AP. It does not mention re-assembly of the helicopter. He said he did not recall sending another invoice, but I think it likely that he did send one referring to re-assembly of the helicopter and repair of the paint damage. It is not with the papers before the court

Mr Kirk was called to give evidence by the Defendants. He is an engineer with 40 years experience, qualified to work on the Robinson helicopters and licensed by the CAA. He had done an annual inspection on the helicopter. In his oral evidence Mr Kirk described the damage referred to in his report as “minor skin damage”. He said he had not heard of EAL. He also said that he had found dents in the rotor blades, but on examination he found them to be within permissible limits. He did not record this, nor make any note as to the location or shape of the dents he saw. He explained that a rotor with such dents might need replacing at the next service, or it might go for 2 to 3 years. He could not recall where the dents were that he had seen.

In cross examination he said the CAA had brought to his attention the list of defects found by Brian Seedle Helicopters Ltd (“BSH”) the following February, in particular the dents to the rotor blades, to enquire whether he knew anything about those faults. He said that he did not know anything about them, and the CAA was happy. He said that rotor blades twist in operation and it is possible for them to get worse. But he could not recall whether the dents which he had seen (which were within permissible limits) were in the same part of the blades as the dents found by BSH.

Meanwhile on 4 April PR wrote to AP. As to the defects found by Mr Kirk, he wrote “I don’t see that we have much choice but to do what needs to be done”. He then raised the questions of insurance and interest:

“On[e] thing I spoke to Geoff about [w]as the insurance coverage. My bank has been hounding me about it. Please please get that to me right away so I can get them off my back. Also, I have been paying the interest at the bank since we bought this helicopter in September. Sales here were slow this winter and I do need this interest amounts paid ASAP. If you can send at least a payment it would ease my awkward position at the bank…”

On 23 April GP replied. He wrote:

“I am concerned at the e-mails we are getting regarding the finances of the helicopter. Andrew is being asked to pay interest on a helicopter that is still not airworthy, why? The agreement was that we would be given from between three to six months before any payment was to be made once a helicopter or aeroplane had arrived in the UK and ready for sale.
As you are aware the helicopter seemed to go missing for over two months and even when it arrived in the UK it arrived without any documents at all. On arrival it was found that it was damaged and painted with yellow paint in a most amateur manner. This is all at extra cost and wasted time. Andrew is just amazed at the way the whole transaction has been handled.
… Please let Andrew have a bank account so that he can send an amount to in good faith, as in no way does he feel responsible for the interest on the wasted months we had no aircraft or helicopter to sell… Neither Tim nor yourself have replied to our letter written on the 19^th October 2006. Please do so”.

On 23 April PR replied:

“As we spoke about on Saturday…

From what I remember of our meeting with you and Andrew here in Waterloo, you believed there was a strong market in the UK for light helicopters and perhaps fixed wing Cessnas. We agreed to provide you with aircraft to sell. The agreement that we set at the time was that we would use our bank line of credit to purchase a helicopter to send to the UK and also a couple of nice 172s. In essence we would be your bank and send aircraft for you to market. As you know, once we put a piece of equipment on to our credit line at the bank, they start the interest clock. This expense marches on. At the time, we had hoped the helicopter would be there in a timely fashion, re-assembled and ready to go.

Obviously it has not gone that way. The amount of time this has taken has been incredible. Unbelievable really. Once we bought the helicopter, we instructed the shop in Puerto Rico to begin measures to have the C of A for export done and to make arrangements to ship the helicopter to the UK. As you say, it seemed to stop dead in the water for a long time. Whether it was the Caribbean way or what I am not sure. Short of going there and grabbing someone by the throat, I did everything I could to keep them moving along. Of course then the shipping process took much much longer than we ever thought it would. Now the helicopter is there and it goes into the shop in the UK. It seems they also are not setting any speed records either. The paint work on the tail sounds like it was done very sloppy. As I have told you, the shop was a Robinson Dealer and I had no reason to think they didn’t know what they were doing. And, they were really our only choice for doing the work. Not sure what needs to be done to rectify it but regardless, it needs to be rectified and made ready to market.

As for your letter of October and the interest payments, we agreed to be the bank on these and you would be responsible for expenses to get these aircraft to the UK to sell. Anything from the USA is going to take time, interest costs and expenses to get ready to sell in the UK. We estimated at the time that 3-6 months should be enough time to get there and get it sold. We are now finding out that is not the case. If you had found this helicopter in the Puerto Rico, USA or wherever, financed it yourselves at your bank, you would be paying interest to them. Also all other expenses involved would be yours. In this case we are using our credit line to send this helicopter to you. We didn’t approach you … I surely don’t know what the helicopter market is in the UK.

Trough no fault of either of ours, this has gone on a long long time. Interest has been running since we bought it. This is what the bank is on me about.

Find attached, the wire instructions you asked for.

I don’t mean to be a broken record on this but I need to keep the banker at bay. I hope you understand my position”.

On 25 May 2007 the CAA wrote to AP informing him that the registration marks G-CFAN had been allocated to the helicopter, but that it could not be flown until it had a Certificate of Airworthiness. And registration in the UK could not be confirmed until the CAA had confirmation of non-registration from the FAA. On 31 May the FAA confirmed to MAL that the helicopter had been deregistered.

There is a document identical to that dated 26 February (para 98 above) save that it is dated 31 May and bears a fax header with the date 1 June 2007. It was written in response to a fax from GP to PR of 31 May. The fax is handwritten by GP. He asks for

“a letter of authority for Andrew to act as your agent in using the helicopter on your behalf for example in demonstrations for prospective customers”.

The handwritten fax of 31 May attaches the letter from the CAA dated 25 May 2007 and GP asks for a copy of the deregistration document the CAA refer to. On the same day the FAA sent a telegraphic message to the CAA confirming deregistration of the helicopter.

On 4 June the CAA confirmed that the helicopter was entered on the UK register as registered to AP “as charterer by demise”. The CAA wrote that according to the information supplied to them the aircraft was owned by MAL and that the charter was schedule to be non-expiring.

No charter was in fact ever entered into between the parties.

Mr Philip Robinson (“Mr Robinson”) had been one of AP’s instructors. He also had interests in the company which issued storage invoices to EAL in 2009 in exchange for services rendered to one of his companies by Atmostherm. He issued six invoices to EAL in respect of “pilot services” at the rate of £350 per day, plus his mileage expenses to drive to the airfield. The first of those invoices is dated 31 July and is in respect of services rendered on 16 and 17 July.

On 31 July PR emailed GP referring to a telephone conversation which he had with AP about a week earlier. It included the following:

“As I mentioned to Andrew, September 1 will be a year! Hopefully you have customers waiting for this to get done. With the British Pound/US Dollar exchange rated at record levels there should be buyers ready to take advantage. As I also talked with Andrew about, our bank will not finance for over 1 year. September 1 you will need to arrange financing on your end as our bank will go no longer. I am still waiting on confirmation of insurance cover. Andrew was going to send it to me….”

On 1 August GP replied. He had been out of action for some time due to illness. He said AP hoped to get CAA approval in a week.. He added:

“I understand that it has cost Andrew an arm and a leg already in handling this matter on your behalf here in the UK, apart from losing face to his prospective customers as a result of delays beyond his control
The situation has not [been] helped as you have not been able to come up with any other aircraft that Andrew had customers lined up for which of course could have helped in setting off your banks interest charges to you”.

Mr Robinson’s second invoice was in respect of pilot services for 17 August 2007.

On 30 August 2007 the CAA wrote to AP in connection with the issue of the Certificate of Airworthiness. The letter recorded that on the test flight the CAA approved test pilot highlighted the following faults:

“1.

Faulty oil pressure sensor
2. Faulty main rotor RPM indicator
3. Incorrect altimeter (wrong UK scale)
4. Maintenance log issue s/n 0257
… the maintenance issue is linked with low rotor RPM warning and any flight at present would be illegal”.

This information had been made known to GP a week earlier. On 24 August he had e-mailed the information about the faults to PR. He told PR that the helicopter had been flown the previous day by the CAA test pilot. That is the same day, 23 August, as the inception of the insurance cover obtained by AP. In that e-mail he claimed to have “interested parties”. He also claimed to have enquiries for fixed wing aircraft and said:

“as you have not come up with any possibilities do you want us to find another source of supply or not”.

On 24 August 2007 PR replied:

“… I tried to call Andrew the last few days and have left messages.

When we began this relationship, you came to us with the idea that there was quite a market in the UK for light helicopters and perhaps some light fixed wing aircraft. As we told you over a year ago, we have never dealt in helicopters and we sure don’t know the market in the UK. We agreed to basically be your bank and partner in placing various aircraft in the UK. As we both have agreed, this helicopter process has been unbelievable. The delays on the helicopter have not been of our making either. We bought and paid for the helicopter 1 year ago. Transportation/delivery was terrible. Much longer than I would have ever planned. It has now been on the ground in the UK since approx Feb. 15^th. We are now coming up on Sept 1. Obviously we have been paying the interest at the bank since we paid for it a year ago to the tune of approx. $2000 per month. You sent us approx. $7000 earlier this spring or summer and we appreciate that. As I told you, our bank will not finance aircraft for over a year and you will now need to arrange financing on your side. Also, the bank released the lien on the helicopter so you could get it UK registered. At this time, they have no legal claim on the helicopter and that makes them very uncomfortable. Their collateral is in the UK. They couldn’t re-possess if they wanted to.

I have not pushed the fixed wing aircraft simply because we need this helicopter done first. I want to feed you fixed wing aircraft but I really want to get this helicopter done before we jump into a fixed wing aircraft. Now fixed wing aircraft we know something about. We have experience with those. For one thing, they can be flown there and basically be there in about a week. Not a month in a box. When it leaves here we will know what is and isn’t done on it. We have sold many Cessna 172s to the UK as you know. In the past, we have had a customer lined up, deposit or contract in place. I would love to work hand in hand with you guys on fixed wing aircraft and it sounds like it could be really a good thing for both of us and make some money at it. But I have to get past this helicopter first.

Not sure how this helicopter deal will end up. Unfortunately we may not make any money due to the over $25,000 worth of interest we have paid the bank in the last year and the C of A process. Hopefully the current exchange rate will help ease this, I think we need to get it sold and then get into the fixed wings we know about….”

On 28 and 29 August Mr Robinson flew the helicopter again, according to his second invoice for pilot services.

On 1 September PR e-mailed to AP at his company e-mail address asking AP to call, saying he could not put off his own bank any longer. He wanted to know if AP had arranged financing at his end. On 3 and 9 October he again e-mailed AP asking him to call him. In the meantime GP had spoken to PR by phone.

Between 14 and 18 September AP flew in the helicopter. On 20 September the annual inspection was completed by Mr Kirk.

On 21 September 2007 AP wrote to the FAA asking for confirmation of the details of the Export Certificate of Airworthiness for the CAA, because he had only a copy of the one dated 26 October 2006. On 28 September 2007 Mr Kirk signed the Certificate of Release to Service.

On 12 October 2007 AP replied. He said he was hoping for a CAA Certificate of Airworthiness soon. There was a postal strike in the UK. He was disappointed about the amount he had spent on the helicopter. On the same day PR replied. He noted the time that had passed since the helicopter arrived on 15 February. He stressed the urgency of the situation with his bank, noting that the bank had no security on a helicopter in the UK. He added:

“Geoff had mentioned possibly paying for half of it and then go on as 50-50 partners. That makes sense to me. I am really holding my banker at bay”.

On 26 October 2007 the CAA issued an Airworthiness Review Certificate and a Certificate of Airworthiness. There is an insurance certificate dated 30 October 2007.

From that point the helicopter was once again ready to fly. This was over 13 months after MAL had bought it in September 2006, and over 8 months after it had arrived in the UK.

In an e-mail to PR dated 7 March 2008 GP gave a list of reasons for delays that had occurred as a result of which, he said, they had lost a number of customers. The first reason was the fact that the helicopter did not arrive in England until February. This was true. Reasons 2 to 8 were as follows.

The second reason was that the helicopter was not a Raven 1 but “a cheaper Clipper 1”, and the documentation was wrong. He referred to a letter from Robinsons. In fact it was a Clipper, but that had been known to him since 4 October 2006, the date of Robinson’s e-mail to him. And a Clipper is more expensive, not cheaper, than a Raven, because it has as additional equipment the floats that AP had written about to PR in his e-mail of 4 October. In the Robinson Recommended Price Summary for new helicopters in 2006 the suggested retail price for a Raven 1 with Standard Equipment is $307,000 whereas for a Clipper 1 with Utility Floats it is $324,000.

The third reason is that as a result of the second reason the helicopter was impounded by UK customs and not released for three weeks. There was some delay in the release of the helicopter, but I am not persuaded that that had anything to do with any misdescription of the helicopter as a Raven. In evidence GP accepted that a reason for the delay in releasing the helicopter was related to VAT. There is only the one letter dated 26 February (cited above) from the shipping agents, Maersk, relating to this. The letter is brief, referring to matters which must have been discussed orally. It is not readily understandable on its own. GP’s evidence about this was also confused. At first he spoke of Maersk as the agent of MAL “instructing” him what to do about the documentation. When I queried this he changed the verb to “advising”. But he was unable or unwilling to make clear the precise nature of the problem that caused the delay in the release of the helicopter. I have seen no shipping documents that misdescribed the helicopter. The Bill of Lading is not amongst the papers.

The fourth reason given is the damage found when the helicopter arrived at the Robinson facility in March. That facility is not identified in this e-mail, but it was TK Helicopters, Mr Kirk’s company. In his e-mail GP mentions the damage found. That is the damage the subject of Mr Kirk’s report of 9 May 2007. In his report Mr Kirk says that the repairs took one week to complete. The e-mail also refers to further damage: “It was also found that the rotor head teeter bearings required replacing due to corrosion”. Mr Kirk made no mention of that in his report or in his written statement, but he charged for this work in his invoice.

The fifth reason given by GP on 7 Mar 2008 is that the engineer (Mr Kirk) had told him that no maintenance documents or export Certificate of Airworthiness had been sent with the helicopter, and that he had chased PR for months for these, and that it was only on 29^th August 2007 that the maintenance records arrived having been found in the maintenance works in Puerto Rico. GP wrote that he had a signed FedEx package. This account is difficult to reconcile with the contemporaneous documents. There is a signed FedEx package dated 29^th August, but there is also one dated 6 March 2007. It is the one dated 6 March 2007 that is sent by Caribbean to GP, whereas the one dated 29 August was sent from PR to GP. The one dated 6 March states that it contains “Log Book/Documents/…” The one dated 29 August states that it contains “Documents Sale Proposals”. The inference I draw from the documents is that such documents as were missing were sent to GP by Caribbean on 6 March 2007, and not on 29 August.

The sixth paragraph of the e-mail refers to “several smaller faults” found when the helicopter was re-assembled, but which are not said to have caused delay. This appears to be a reference to the 4 faults identified by the CAA in a letter dated 30 August 2007 cited above.

The seventh and eighth paragraphs of the e-mail are complaints that GP had to chase PR for the Export Certificate of Airworthiness and the deregistration document from the FAA. This is impossible to reconcile with the documents dated 31 May set out above. Deregistration was certified by the FAA the day it was asked for. It was not until 21 September that AP faxed the FAA asking for an original of the Export Certificate of Airworthiness, saying that he had only a copy.

When asked about these matters GP was unable to give an explanation, or in some cases accepted that he had been mistaken. I formed the view that the e-mail was not a truthful explanation of why it took from March to October for the helicopter to be certified as airworthy in the UK. The prospective customers said to have been lost were not identified in the e-mail and have not been identified since.

The helicopter log books record it as having flown 608 hours when it arrived in England. On 24 October 2008 there were recorded 724.9 hours. That is a difference of 116.9 flying hours. The Paynes stated in evidence that they are unable to account for 74.4 of those hours. I did not believe AP when he said this.

The logbooks record the date of each flight, the number of flights on that date, the total flight time on that date and the total since manufacture. Of the 116.9 hours between October 2007 and 24 October 2008, 42.5 are accounted for. 12.7 hours were recorded before the issue of the Certificate of Airworthiness by the CAA on 26 October 2007. The pilots were AP and Mr Philip Robinson. These must have been for testing the helicopter. There are 7.4 hours recorded in the log book for days in respect of which Mr Robinson sent invoices. These are in the period 23 November 2007 (a maximum of 3 hours), 23 and June 2008 (a maximum of 2.2 hours), 16 July 2008 (0.8 hours) and 18 September 2008 (a maximum of 1.4 hours). There are also 20.4 hours which are the subject of two invoices from EAL to Manchester Helicopter Charter, all in the period 1 August 2008 to 18 October 2008. Apart from these there was one flight by AP on 27 September 2008 for 1 hour.

For reasons explained below, it is particularly significant that no explanation is given for how the helicopter had, at the 50 hours inspection on 24 February 2008, a recorded total of 656 hours. 656 - 12.7 - 608 = 35.3. So it is 35.3 hours that were flown in that period. Of these 35.3 hours a maximum of 3 were flown by Mr Robinson on 23 November 2007, leaving 32.3 unaccounted for. It is following that period that 52 defects were found by BSH, which had not been found by Mr Kirk. BSH is an approved Robinson Service Centre, as is Mr Kirk’s firm.

There was one exchange of e-mails in November 2007 in a similar vein to the previous e-mails. On 14 January 2008 PR wrote again. He asked whether there was any progress with the helicopter or with more financing at the Paynes’ end. By this time he had paid nearly $30,000 in interest. On 31 January 2008 AP replied saying they had discussed matters with their accountants and were looking for alternative funding. He wrote:

“… we can’t be seen to be purchasing any part of the helicopter because at the point of sale we would be responsible for the VAT element which can’t be reclaimed, I will give you a call next week with our accountants proposals. We do have plenty of interest in the helicopter but due to the weather and short days nobody is committing as they also haven’t sold…”

On 7 and 19 February PR e-mailed AP pressing for a response and call from him.

On 27 February 2008 BSH reported to AP with the list of 52 defects in the helicopter, with the rectification process it proposed for each. The defects included dents on the main rotor blade. He issued an invoice to AP dated 29 May 2008 for £20,736.65 for the supply and installation of the rotor blades. In July, August and September it issued further invoices for the sums of £32,612.13, £235.18 and £2,803.66. These were all issued to EAL. The first two were for repairs and the last was for the 100 hours inspection. It also provided diagrams illustrating the location and shape of the dents, and recorded that they were of a maximum of “3 thou” whereas the maximum permitted was “2 thou”.

On 1 March 2008 EAL commenced to trade, as is recorded by AP in his director’s report.

Instead of a response to PR’s requests of 7 and 19 February, on 4 March GP sent an e-mail to PR saying that they had received a survey on the helicopter reporting 52 defects, some so serious that the helicopter had been taken out of service. As explained above, the helicopter had by this time been flown a number of hours, about 35.3, since its certification as airworthy in the UK on 26 Ocober 2007, and for 32.3 of these no explanation is given by AP. But GP did not mention that in his e-mail. He said that these defects were present on the helicopter’s arrival in England in these words:

“I would like to know how a helicopter can be checked in America have an Export C of A and then be sent in this condition”.

On 5 March AP wrote to PR recording a telephone conversation between PR and GP the previous day in which PR said to AP that TM had had the helicopter inspected in Puerto Rico. AP challenges that that was said to him. On the same day GP sent two e-mails to PR. In the second he suggested PR seek legal advice. In the first he asked for the Puerto Rico inspection report. He wrote:

“… I have just telephoned the engineers and they tell me that the machine in question has been worked very hard in their opinion and had never had an annual check or regular service … I am hoping we will come to some arrangement that will eventually be to the benefit of all concerned”.

On the same day PR replied that he had told AP that when a certified FAA mechanic puts his name and signature on an inspection it is expected to legitimate. He was referring to the Export Certificate of Airworthiness. He wrote the same day reporting on a conversation he had had with TM, saying TM had instructed PR to file suit against AP.

It was in response to this that GP wrote the e-mail of 7 March 2008 which is cited above. In the tenth paragraph he wrote:

“Because of pressure put on us by Paul in wanting us to help in financing the Helicopter we have had to get a sales survey undertaken for the finance company which has resulted in the list of defects. These should have been picked up, if as we are told a full inspection was made on the Helicopter prior to purchase…”

What he does not say in this paragraph is that these defects were not picked up by Mr Kirk, and that the helicopter had flown 35 hours since certified as airworthy by the CAA, and the CAA inspector should, by this logic, also have picked up the defects. The e-mail is misleading. BSH issued a report and Certificate of Release to Service dated 20 June 2008. It records that what was carried out at 656.5 hours was a 50 hour inspection in accordance with CAA requirements. There is no mention of it being a sales survey for any finance company, and no such company has been identified.

The log book records that the next flight was on 23 June. I infer that the helicopter remained with BSH out of service for the intervening four months. No explanation has been put forward, for why it took so long.

This suppression by the Paynes of what happened to the helicopter in the months preceding the BSH report of 52 defects is central to their case, and not accidental. The Defence, verified by a statement of truth made by AP, is untrue in the same way. The Defence pleads that the helicopter arrived in England in poor condition. It gives particulars in three sub-paragraphs. The first sub-paragraph is the minor damage described by Mr Kirk in his report of 9 May 2007. The second sub-paragraph is the 4 items referred to by the CAA in its letter of 30 August. The third sub-paragraph is as follows, and it is on the basis of this that the Defendants counterclaim for £104,013.52:

“As a result, the helicopter was given a thorough survey which indicated a total of 52 faults. Six of the faults were considered so serious that the helicopter was immediately grounded. The faults included rotor blades which required replacement”.

It is not true that the discovery of the 52 faults by BSH in February in 2008, at a 50 hour inspection, had anything to do with the letter of the CAA of 30 August, or the report of Mr Kirk of 9 May. The Defendants’ case implies (although they refrain from expressly alleging) that the 52 faults were missed by the FAA inspector who signed the Export Certificate of Airworthiness, by Mr Kirk, and by the CAA inspector who signed the UK Certificate of Airworthiness in October 2006.

In my judgment, having considered the expert evidence referred to below, it is likely that the faults affecting the airworthiness of the helicopter arose as a result of events between 26 October and 24 February 2008 during which the 32 hours of flying time were recorded which AP claims not to remember, and which AP and GP withheld from MAL in their contemporaneous e-mails to PR. Nor is there any documentary or other evidence as to where the helicopter was actually located during this period when it was not flying.

From this point the relations between the parties deteriorated. PR did agree to assist in locating substitute rotor blades. But the parties exchanged e-mails repeating the points already raised and setting out their respecting grievances and contentions.

One of the items that were found to need replacement by BSH in March 2008 was a rotor blade. On 13 May GP e-mailed to PR the costs of replacement. The total was £23,526.14 plus VAT. The exchange rate was then $1.97 to £1, and the total was $43,346.49.

On 28 June 2008 GP wrote that they were making arrangements for the helicopter to be chartered with a view to repaying some of the Paynes’ costs. TM objected to this and PR said in evidence that he told them not charter it. He did not accept that he had ever agreed that they should charter it.

In July 2008 and later PR e-mailed to GP informing him of interest from prospective buyers that he had located in the Caribbean and South America. GP replied that MAL could collect the helicopter once they had received cleared funds to cover the costs they had incurred which he quantified at £46,000 at that point. In August 2008 PR notified AP of the interest of another potential buyer in South America. He asked for copies of the records. He also started to advertise the helicopter for sale in the USA.

On 29 August 2008 AP replied referring to the letter of 19 October 2006 and saying that

“until our costs have been met in full we have been advised not to allow the helicopter to go into the hands of a third party”.

On 25 March 2009 solicitors for MAL formally demanded delivery up of the helicopter, as set out above. On 26 March 2009 solicitors for the Defendants refused to deliver up the helicopter, claiming a lien in respect of expenses and costs incurred in respect of it. They later quantified those costs in the sum of £93,990.62. On 24 June 2009 this court order the delivery up of the helicopter against payment of £70,000 by MAL to be held in an escrow account pending further order of the court. On 27 August 2009 a further order for delivery up was made by this court on MAL’s application for committal of the Defendants for contempt of court in failing to comply with the earlier order.

In September or October 2009 the helicopter was delivered up to MAL. On 10 May 2010 it was sold, as stated above.

On 15 December 2009 Atmostherm issued a quotation to Heli-Support Ltd for the provision of a new oil fired hangar unit. The hangar is situated at Taurus Hangar, City Airport Manchester. Heli Support Ltd is a company associated with Mr Robinson. The total price quoted was £10,340 plus VAT. On 31 December 2009 Atmostherm issued an invoice in this amount. The invoice was addressed to EAL. The narrative stated that the invoice was “in lieu of the payment of storage invoices owed by Eminence Aviation Ltd”.

However, as Mr Robinson explained, there were at that time no invoices in respect of sums owed by EAL. Mr Robinson explained that he was asked to produce invoices to contra the invoice from Atmostherm. He produced a series of ten backdated invoices. It is obvious that they are backdated, because the first one, dated 31 March 2007, refers to the helicopter by its registration number which was not allocated to it until 25 May 2007. EAL had not been incorporated until 15 February 2007. Also, as Mr Robinson explained, Heli-Support had first been a trading name of Flight Academy, and it was not until 2008 that it had been separated into a company in its own right.

The invoice dated 31 March 2007 is said to be for

“the value now due for parking and storage covering 1^st quarter period January to March 2007 … £1233.75”.

For half of that period the helicopter was not in England. There are similar invoices for subsequent quarters the last ending June 2009 April to June 2007 and July to September (when the helicopter was still with TK Helicopters). AP’s explanation was vague. He said that he assumed the invoices were in arrears, he could not remember, but he thought that they had had to book storage space when they had expected re-assembly to be completed earlier than it was.

On 29 November 2009 there was an order directing the parties to exchange statements of witnesses of fact in what is now the usual way by 19 February 2010. Witness statements of AP and GP were served dated 31 March 2010. GP’s witness statement is a little over one page. He states that he has read AP’s witness statement and agrees with its content. The parts of AP’s witness statement dealing with the discussion on the visit to Iowa are expressed in terms which do no identify essential details. For example, he states “It was agreed that [the helicopter] would be sent over to England with a view to selling…” but he does not state who were the parties to this agreement, or how it was reached. There is little that identifies who was speaking, what there is does not distinguish himself from his father. In relation to the introduction of EAL, AP refers to the letters written about the time of the arrival of the helicopter and states “It was for this reason that all parties agreed that the business agreement would be through [EAL]…” He refers to numerous telephone calls (and the emails themselves show that there were numerous telephone calls) but he does not recount what was said during any of these calls. In this last respect AP’s evidence is similar to that of PR, who gave no account of any of the calls.

Before the witnesses were called I told counsel that I expected to find little assistance from evidence given in this form on matters which were contested. I invited them to adduce the oral evidence on the main issues by examination in chief. The result was that TM gave evidence in chief over a few minutes and PR gave it over about 15 minutes. Their recollection of what was said in 2006 was clearly poor.

On the other hand AP gave evidence in chief for nearly 2 hours. And GP gave evidence in chief for nearly an hour. They both gave evidence that they recalled the events and discussions in Iowa in great detail.

In the Defence and Counterclaim signed by AP, and in his witness statement of 30 March 2010, AP said that there was an agreement reached orally: MAL would source the helicopter, AP would sell it in the UK, AP would pay the shipping costs which would be reimbursed once a sale had been achieved and any expenses AP had to incur would be reimbursed and if there was any profit from the sale of the helicopter it would be split equally. But he does not say exactly when or how or with whom that agreement was reached. In his oral evidence in chief AP asserted that, on the contrary, no agreement had been reached.

AP said that there was only a short discussion with TM. TM had said that he was not a specialist in helicopters, but he could located one, and export it to the UK. AP said that TM said that if the helicopter sent to the UK was not sold within 12 months it would be returned to the US and sold. TM said that he did not know what the shipping costs would be but he expected AP to pay them.

I note that there is no reference in any of the contemporaneous documents to returning the helicopter to the USA. And the first reference in the documents to a period of 12 months is in the documents dated 15 February to 31 May 2007. There is no reference to the 12 months in the Defence and Counterclaim. In his witness statement AP said that there was never an express time limit on the sale. In cross-examination AP was reminded of what he had said in an affidavit dated 23 June 2009 in opposition to the application for delivery up. He said there “I do not recall there being any express time limit on the sale”. He replied that when he deposed to that he had not remembered the letters signed by PR which referred to 12 months.

AP said that PR came into the room holding specification sheets for 3 helicopters (one being a Robinson R44) and 2 fixed wing aircraft. After some discussion AP and GP said the R44 Raven was the type of helicopter required. AP said there was no discussion as to how the transaction would be concluded. He said there was no mention of interest or of AP buying the helicopter. He was not in a financial position to do that. AP said that he and GP expected prices and specification sheets to be sent over to the UK, and once everything was agreed the Paynes would get the helicopter shipped over to be sold. He said that the price of $265,000 on the specification sheet was for them to take to the UK. AP assumed it was the price that MAL was buying at. They did not comment on the price. PR gave them a copy of the Bluebook to take back to the UK. TM said he was going to Puerto Rico to have a survey done and check the log books. AP confirmed in cross-examination that his recollection was that no deal was done in Iowa: there was no agreement then about the helicopter.

AP said that at that time a Mr Savage had expressed interest in buying a helicopter, but no one else had.

AP said that they were told that the helicopter would arrive in 4 to 6 weeks. When it did arrive AP set about getting it registered. He obtained forms from the CAA. He did not understand the words “demise charterer” on the registration in his name. He said that for the purposes of registration he had to have a letter from the owner, and that is why the documents dated 31 May came into existence. He wrote in a letter to PR dated 21 April 2008 that that “the helicopter is registered in the UK as an agency charter for a period of 12 months”, and that that reflected his understanding in 2007. EAL could not be on the CAA register, it had to be himself. He said that EAL was incorporated because of the problem of VAT, but he did not explain what the problem was, or how the incorporation of EAT addressed the problem. AP said that it was not himself but GP who was dealing with that, and who spoke to Maersk and to PR about the documents. GP did not keep him informed of the details. He said Maersk advised that the documents had to show that the helicopter was for sales demonstration. He said the helicopter was released to EAL, but did not identify any documentation showing that. AP said that the document dated 26 February was produced after a conversation between GP and PR and it was to be used to show the authorities. He did not recount any details of the conversation, or say whether it ever was used to show to any authority, and if so for what purpose. He said that the reference to the helicopter being in the UK for up to twelve months was important for VAT purposes.

As to the various expenses listed in the counterclaim as paid in respect of the helicopter, AP said that GP paid the freight (£2480.95) and the customs clearance costs (£95.95). EAL paid for a six month service (£2,803.66) and a further sum in respect of airworthiness (£2,415), while he paid the rest. The storage was paid through his company Atmostherm providing a heating installation, as set out above. This was done on advice given by the company’s accountants.

In relation to the use to which the helicopter was put while in England, AP said that he could give very little information in answer to questions in cross-examination. He said he thought that there were 12 or 13, may be 14 sales demonstrations, and that they tended to last an hour. Some of these were before the helicopter went to BSH and some after that. He said he believed that when Mr Robinson flew the helicopter it was not for sales demonstrations, but for maintenance. He said that he did not know whether the helicopter was chartered for more occasions than those for which credit is given in the counterclaim. I did not believe that AP was being frank with the court when he said he had so little knowledge of these matters.

GP gave evidence that he had spoken on the phone to both TM and RP before he visited Iowa. They had made clear that that they would be interested in finding an agent for fixed wing aircraft in the UK. GP had explained AP’s interest in a Raven helicopter, and TM or RP had assembled spec sheets of helicopters before the visit.

GP said that at the meeting AP had said that before any aircraft were brought to the UK a full inspection should be made to make sure that it was in good condition, bearing in mind that MAL were to be the purchaser and “we are going to be agents selling on your behalf”. He said he recalled AP using those words. GP said there was no dispute that MAL were to be the purchasers and AP the agent. TM said that he we would get an inspection done. He said that at no time did AP discuss or agree to buy the helicopter, or any aircraft, even on a deferred basis. Interest was never discussed and it was not agreed that AP would pay it. At no point was the discussion brought to finality.

GP said that after the helicopter arrived he spoke to PR by phone and told him that there was a problem with VAT, and the Maersk had said that in order that MAL should not pay VAT MAL had to have an agent who operated through a limited company. Following this, it was agreed between GP and PR by phone that EAL would be the company that would operate as MAL’s agent. GP said that PR also said that if the helicopter was not sold within 12 months then to satisfy MAL’s bank they would have to consider sending it back to the USA, because the bank did not have a lien. He said GP said that the documents dated February to May 2007 bearing PR’s signature would satisfy MAL’s bank.

In cross-examination GP said that he had seen the specifications sheets of aircraft before he went to Iowa. He said that TM did not say there was a 6 month time limit or that AP was to pay interest. But they did discuss the fact that MAL had a rolling facility with its bank, and that the costs of banking along with other items would come off the final profit. MAL would provide banking facilities for the aircraft and helicopter to get to the UK. GP said that he said that all costs would be deducted and shared, and that that was agreed in Iowa. Storage had been discussed with GP before he went to Iowa, but he did not agree anything about it. GP was reminded that in his written statement he had said that the agreement was as set out in the statement of AP, and he had written:

“I do not recall an express time limit on the sale but my understanding had been that they would not press Eminence or Andrew for any sale or payment within the period of 3-6 months of us having a saleable condition aircraft in our possession”.

GP said that there was no agreement that there would be a sale or payment. There was never a discussion of the price at which AP was to sell the helicopter for in the UK. GP understood that the $265,000 was the price that MAL were to buy the helicopter for.

Two expert witnesses gave evidence for MAL, Mr Burton on engineering issues and Mr Bendoni on valuation issues. For the Defendants Mr Robinson was called as an expert witness on both topics. But since he had personal knowledge of the helicopter, he was also asked questions in cross-examination on factual matters.

Mr Burton and Mr Bendoni are experts whose evidence I am able to accept with confidence.

Mr Robinson’s evidence was of little value to me. He sets out the defects found by BSH saying that “during re assembly and later flight testing further defects were found”. But he knew that was not true. He had himself flown the helicopter both before and after the re-assembly by Mr Kirk, to whom he makes no reference (although on the previous page of his report he had referred to the paint damage that Mr Kirk had found and reported upon). He also misleadingly compared the values of a 1999 Clipper 1 with the values of a 2000 Raven 1, to arrive at the erroneous conclusion that the Clipper was worth less.

Mr Burton reached the following conclusions which I accept:

In the light of other findings that I have made, the evidence of Mr Bendoni is not relevant to any issue that I have to decide. But he reached conclusions which, in case it should become relevant, I record that I accept. He did not have any data of the asking price of R44 Clipper helicopters in 2006 or 2008 of similar age and specification to the helicopter. The conclusions I accept are as follows:

“13.1

A factory new Robinson R44 Clipper helicopter is less popular in the UK than a Raven. However the UK fleet is, in percentage terms, a larger market than the rest of the world. In 2008 there were suitable conditions for the sale of a dollar priced good quality immediately available R44 aircraft in the used market.

13.2

The fact that a helicopter has flown a relatively low number of hours for its age increases its marketability by an amount that depends on the current market conditions. It certainly does not diminish its value.

13.3

In principle, an aircraft shouldn’t have a different value or marketability once it has been released to service following the repair of damage and the aircraft is restored to its full airworthiness, provided that the repairs had been carried out by an approved maintenance organisation with the use of approved repair schemes and genuine replacement parts. However, it has to be expected that, as between two similar aircraft (same specs and hours/age), the one without damage history would be preferred by a prospective buyer, but this might be marginal if the damage was not serious.

13.4

Whilst the Aircraft Bluebook is a database of historical aircraft information used by a vast array of professionals and it is used in the market assessment of aircraft valuation, we at Sloane Helicopters do not use the aircraft Bluebook as it is predominantly based on the transactions taking place in the USA or with a relevance to the USA market. Therefore I am unable to opine on whether or not, in August 2006, the Aircraft Bluebook would have suggested that this helicopter was worth US$245,000.

13.5

I believe that the exchange rate condition in 2006 created relatively favourable conditions for the marketing of used Robinson R44 helicopters coming from the USA.”

In a subsequent joint report made by Mr Robinson and Mr Bendoni, Mr Bendoni agreed that the long term residual value of the helicopter had been increased when it had been fitted with new rotor blades. He also stated that the high demand for aircraft from 2005 to 2008 meant that premiums were paid for aircraft to ensure their immediate availability which were above suggested retail prices. The helicopter arrived in the UK at the top of the market and returned to the USA when market conditions were worse.

In addition to findings that I have made in the course of the above narrative, I make the following findings.

As to what they saw and who they met, I accept the evidence of AP and GP. It must have been a memorable few days. For TM and PR this was a deal about helicopter, and in that respect it was out of the ordinary for them. It was also out of the ordinary for them because they were dealing with customers who had come to Iowa from England. But the meeting was far less out of the ordinary for them than for the Paynes, who had never had any dealings over any aircraft before, and certainly not in Iowa.

But as to the details of what was discussed I did not find the evidence of the Paynes credible. This is for a number of reasons. First, their evidence includes inconsistencies which I have already noted. This is not surprising, since they had no contemporaneous notes or material from which to refresh their memories. Second, the detail with which they claimed to recall the discussions in Iowa was in contrast with the absence of recollection that AP, and to a lesser extent GP, claimed to have about more recent events, including in particular the location and employment of the helicopter in the period October 2007 to February 2008, and the problems with the English authorities when the helicopter arrived. Nor could they recall the content of the many phone calls referred to in the e-mails which had taken place since August 2006. But most significantly I did not find GP’s evidence credible because of what he wrote to PR on 7 March 2008. So much of what he wrote was untrue, as I have found in paras 127 and following. And I did not find AP’s evidence credible because of what AP verified as true in the Defence, and which I have found to be untrue: para 148. They were unimpressive witnesses. Finally, but not least in importance, I found their evidence lacking in credibility because it was difficult to reconcile with the contemporaneous documents.

Moreover, the version of events put forward by the Paynes seemed to me to be overall lacking in plausibility. As they said in their letter of 19 October, it was they who had approached TM with a proposal that AP should exploit information he had been given by his contacts that there was a real shortage of Robinson type helicopters in the UK. MAL did not deal in helicopters and knew nothing of the UK market. Nevertheless, MAL bought a helicopter for about $240,000 and shipped it to them in the UK without requiring any payment, or even any security in advance. The Paynes state that they could not afford to buy a helicopter. It follows that this was AP’s only chance of exploiting the commercial information he had been given by his contacts in the aviation world. Effectively AP was receiving the equivalent of a loan of the order over $240,000 from virtual strangers. AP was being given an opportunity by MAL to profit from a substantial sum of money expended from its own resources by MAL. On AP’s version of events he had no obligations to speak of. Yet he has given no account of what he did with the helicopter with a view to profiting from it. GP and AP have instead made constant complaints against MAL, many of them untruthful, as I have found. AP had the helicopter in England for 2½ years and did not sell it. MAL resold it within months of obtaining delivery up of it, including the time required to ship the helicopter back to the USA.

I consider now the consistency of the oral evidence with the events that occurred and the contemporaneous documents. There is no dispute that at the meeting in Iowa on about 23 August PR and TM were quoting a price to the Paynes. GP wrote the price down on the specification sheet. A price is indicative of a sale or an offer to sell. There is no suggestion that RP or TM mentioned a price at which AP should sell. The absence of such a resale price suggests that what was being discussed was not a legal relationship of agency.

MAL had a model for a sale to a buyer in Europe with provision for retention of title. MAL had done this before with the Cessnas they sent to France and Germany. And they were proposing to send Cessnas to England to be sold by AP. It seems improbable that they would have discussed a relationship of agency with AP, when MAL had not had agents (in the legal sense) in Europe before.

The first e-mail is dated 1 September, within a week of the meeting. It recites the figure of $265,000 for the helicopter. It does not use the word price, but that is clearly what it is. On 19 September what PR attached to his e-mail was a form of contract for a sale and purchase agreement, not for any other relationship. When GP first raised a query, which he did on 2 October, he confirms that what was being discussed was a price. He does not say he has not agreed it, and he clearly wants to continue to negotiate it. It is still a price that he is discussing. A price is most consistent with a sale, rather than with an agency or some other form of contractual relationship.

On 3 October day PR responds referring to “the prices you agreed to”. The discussion continues that day about prices. On 4 October AP e-mailed the manufacturer saying that he was purchasing a helicopter. The discussion continues about prices.

Even in the letter of 19 October 2006 at para 6 the Paynes refer to prices at which MAL would “let us have” helicopters and other aircraft as stock. The paragraph includes the words “invoice us”. In a sale money normally moves from the buyer to the seller, whereas in an agency it more commonly moves the other way. It is true that that paragraph also states that we would share the profit”. But that is vague and difficult to reconcile with prices for which MAL were to invoice the Paynes. There is no other mention at that time of any profit sharing arrangement, and that is not the case advanced by the Defendants.

Looking just at the documents I would find that by 27 October 2006 it was common ground between the parties that what they were discussing was a sale. In so far as there was disagreement, the highest it can be put from the Defendants point of view is that AP had not yet agreed a price.

The first mention of interest in the documents was in PR’s e-mail of 19 October. What was being discussed was a conditional sale in which there was expected to be a delay before MAL were reimbursed their outlay. It is obvious that the time value of the money they laid out would need to be provided for, and that a commercially minded person in the position of AP would understand that. It is possible that PR might have omitted to mention interest to the Paynes in Iowa. But placing the burden of the interest upon the Paynes was the natural thing to agree. If this were not done, then MAL would need to charge a higher price to obtain any profit for itself from the deal. And since AP had complete control over the time that a sale would take once the helicopter had arrived and been re-assembled in England, the most plausible agreement would be that he would bear the cost of delay in interest. When interest was first mentioned on 19 October it did not provoke an adverse reaction on the part of the Paynes. The response was “you have still not resolved the matter of basic prices”.

As to what happened on 27 October 2006, it seems to me most likely that both sides agreed to disagree. That is each was maintaining his position, in the hope that they would not have to resolve the dispute that was beginning to arise, or that they could resolve it on a commercial, rather than a legal basis, when the helicopter was sold. But whatever the dispute was at that point, as set out in para 88 above, AP agreed to accept delivery of the helicopter. AP was faced with PR’s assertion by e-mail that he had agreed a price and that he would pay the interest, inspection and ferry costs. If AP were right that there was an agreement for an agency, or no agreement at all, then, faced with this assertion, AP could have refused to accept the helicopter. But he did not do that.

Up to this point, with the sole possible exception of the uncertain reference to sharing the profit in para 6 of the letter of 19 October 2006, the parties had clearly been discussing a price for a sale. By December AP had agreed to accept delivery. AP did in fact accept delivery of the helicopter when it arrived in the UK in February. If AP were right in contending that there was an there were agreed terms of which MAL was in breach, that too would have given AP the right to reject the helicopter. If the helicopter was not in accordance with the agreed description (whether because it was a Clipper or because it was not in good condition), or if the helicopter had been shipped later than the time agreed time for shipment, AP would have had the right to reject the helicopter on whichever of these bases applied. But he did not purport to do so.

At that point there is no suggestion in the documents of any arrangement inconsistent with a sale, and very little suggestion in the documents of any arrangement other than a sale.

So the documents dated after the arrival of the helicopter must be considered at this point. For reasons given in para 9, there is nothing inconsistent with a sale in any of the documents signed (or apparently signed) by PR dated on and between 15 February and 31 May. The buyer under a sale in which the seller retains title to the goods will be a bailee, and an agent, as well as a purchaser. Accordingly, in my judgment those documents are neutral as to the nature of the legal relationship between the parties. So I do not need to make any findings as to whether PR did or did not sign the documents that he contested in evidence.

There is nothing that occurred after 31 May 2007 which is, or could be, relied on as establishing or varying the legal relationship between the parties.

The significance of the documents referring to EAL is said to be that they evidence a novation, and that they evidence an agreement, or a variation of the agreement, so as to provide that the time within which the helicopter is to be sold is 12 months instead of 6.

There is in my judgment nothing in the documents to support the contention that by signing any of those documents (assuming that he did sign them all) PR was agreeing to any substitution of EAL for AP. The documents which refer to EAL do not mention any substitution. The substitution of a dormant company with no assets for AP’s personal liability would of itself have served no commercial purpose for either AP or MAL at that stage. AP does not suggest that he intended to divest himself of his obligations to MAL, even of the obligations he admits to owing, as a bailee. The helicopter was in fact registered in his own name, not EAL’s. It is not apparent to me what purpose was to be served by the incorporation or mention of EAL. Whatever purpose may have been intended, the plan was not put into effect. EAL did nothing at all, and paid nothing at all, relating to the helicopter. I have not been able to understand the vague references to VAT in this connection.

There is thus in my judgment no documentary evidence of any agreement other than a sale to AP. There is no evidence of an oral agreement to novate the legal relationship to substitute EAL for AP. The documents dated 15 February to 31 May 2007, whether referring to EAL or not, do not evidence a novation. At most they identify EAL as authorised to be a bailee. There is no evidence that EAL ever assumed that role. It did not start to trade until 2008.

Once delivery of the helicopter had been accepted by AP in the context of a negotiation about a sale (and not about any other legal relationship) it may not matter in principle whether or not there was an agreement as to the price. If there was no concluded agreement as to the price, then s.8 of the Sale of Goods Act would apply, assuming that there was a concluded agreement to sell and purchase. It would fall to the court to determine a reasonable price.

The circumstances of this particular case (referred to in s.8(3)) include not only the attributes of the helicopter. They would also include the market price, if there were one, at the time and place of delivery. But there is no market price in a second hand helicopter. In this case there is expert evidence, and other contemporaneous evidence as the value of the helicopter.

The possibilities that remain at this point are that there was an agreement to sell, or no agreement at all. I find that it is more probably than not that there was an agreement reached orally in Iowa in 2006 by MAL to sell and by AP to purchase the helicopter for $265,000, on the express terms set out in para 5 above, and subject to implied terms in accordance with the Sale of Goods Act. Accordingly the price was payable on 16 August 2007.

AP quickly regretted the agreement, and tried to renegotiate it. But he did not disavow it until months later. Having seen him give evidence, I find that the contents of the early e-mails in which he questioned the agreement are more likely to be an attempt by him to get out of an agreement that he regretted having made, than to reflect a genuine belief on his part that he had not made the agreement that PR was asserting that he had made. I found PR to be straightforward, although lacking a good memory of events. His e-mails were truthful. I have already expressed my findings as to the credibility of AP and GP.

MAL is therefore entitled to damages for non-acceptance under s.50 of the Sale of Goods Act. There was no available market for this second hand helicopter in the sense used in that section, and no suggestion has been made that the sale by MAL was at an undervalue, or unreasonably delayed. I find that the measure of damages is the difference between the price of $265,000 and the resale price of $180,000, namely $85,000.

In addition MAL is entitled to interest as agreed, being the sums that MAL was liable to pay, and did pay, to its bankers from the date when it paid for the helicopter until the date when it recovers the damages in this case. The interest will be on the sum that MAL paid for the helicopter, and will be calculated on the amount outstanding from day to day.

While some submissions have been addressed to me on this, I invite the parties to agree the figures if possible, or to make further submissions to me in relation to any issues on the matter of interest that cannot be agreed.

On the findings that I have made, it does not appear to me that there is any additional damage claimed in respect of the claim in conversion. While AP did charter the helicopter and receive money for that, that was a profit, not damage suffered by MAL.

I have rejected the Defendant’s case that there was an agreement in the terms alleged in the Counterclaim. So the counterclaim can succeed if at all on the basis of restitution. On the facts as I have found them, the counterclaim in restitution could be advanced only by AP.

The Counterclaim was drafted and amended before the helicopter had been sold. The Re-amendment was after it had been sold, but none of these versions of the pleading reflect what seems to me to be the implications of the resale.

The largest item counterclaimed is £38,093.31 as the cost of repairs in 2008, which I take to be a reference to the repairs by BSH. The premise of this is that the sums expended upon the helicopter resulted in a benefit to MAL as the owner. Since the helicopter has been sold, it seems to me that any and all benefit to MAL from this must be reflected in the price at which it resold the helicopter. For example, new rotor blades are betterment. But the fact that the helicopter had newer blades than it would have had if BSH had not installed the new blades in 2008 is reflected in the resale price. On the facts that I have found the counterclaim would have failed in any event. AP has been unable to persuade me that the repairs in 2008 were the result of any defect in the helicopter that existed when he took delivery of it, and he has not discharged the burden of proving that the defects were not caused by failure for which he is responsible to take reasonable care of the helicopter.

The next largest item is £34,075 as the cost of insurance and storage. Other items relate to annual services which were required. None of these items is a benefit to MAL. These were costs which, under the contract of sale, AP was bound to assume. Most of them were in any event incurred at a time when AP was in breach of contract for having failed either to pay for and take title to the helicopter, or to deliver it up to MAL.

The only remaining items requiring consideration are sums totalling £5,077 said to be the costs of repairs to the helicopter for defects which Mr Kirk found when re-assembling it. It is not disputed that these defects existed. While they are not claimed as damages for breach of the contract of sale, it is right that I should approach the counterclaim on the facts as I have found them to be, not as AP claimed them to be.

The damage claimed for repairs to the paint on the body work (£1,864) was damage that occurred after TM had inspected the helicopter. It was caused during disassembly. That was before the helicopter was delivered to AP, and at a time when the helicopter was still at the risk of MAL. In my judgment this is damage for which MAL ought to be liable. I do not need to make a finding as to when or where delivery occurred in this case, because the damage was on any view caused before delivery. The value should be set off against the claim.

The remainder of this part of the claim is in respect of rotor head bearing that was found to worn and damage to the radio. The helicopter was airworthy when last certified by the FAA. I can make no finding as to when or how this damage occurred. It is damage which is likely to have been of a kind that is reasonably to be expected in a second hand machine. The counterclaim for these items fails.

For the reasons given above the claims succeeds in the sum of $85,000 plus a sum in interest to be determined, and the counterclaim succeeds in the sum of £1,864.