DAR International FEF Co v AON Ltd

A contractual provision requiring payment into a jointly agreed and designated bank account may regulate the method of payment and displace the common-law rule permitting payment to one joint creditor.

Where no account is agreed, the payer is relieved of any duty to pay until the specified arrangement exists. It is not free to pay one joint recipient alone. Such payment may breach an implied negative obligation owed individually to the joint recipients and give rise to damages. A pre-existing act may constitute consideration where it was requested, payment was understood, and payment would have been legally recoverable if promised in advance.

Aon appealed from findings by HHJ Knight QC in the High Court, Commercial Court Division. The judge held that a tripartite agreement concerning remuneration from Saudi Arabian Airlines business was binding and ordered an account of revenues and payment to DAR of its agreed share.

The appeal raised issues concerning consideration and the construction of the payment clause. In particular, Aon argued that, absent an agreed bank account, it could discharge its obligation by paying FNS Consultant or Mr Sfeir alone. Questions concerning the scope of qualifying revenues, the effect of the US$400,000 provision and the precise quantum remained unresolved.

1. Disposition. The Court of Appeal, in the judgment of Mance LJ agreed by Ward LJ and Jackson J, dismissed the appeal on the substantive issue. The judge’s order was nevertheless required to be reformulated on a declaratory basis and the unresolved issues remitted.
2. Consideration. DAR’s assistance in introducing or transferring the insurance business was requested by Aon and supplied pursuant to the parties’ discussions. It was understood that DAR would receive remuneration. The later agreement crystallised the remuneration arrangement. The pre-existing act therefore supplied consideration.
3. Construction of the payment clause. The requirement for payment into a designated bank account to be agreed was directed to the method of payment, not merely its timing. It protected each of the three parties and modified or excluded the common-law rule that payment to one of several joint creditors discharges the debt.
4. Implied negative obligation. The agreement included an implied obligation on Aon not to pay commissions otherwise than into the jointly agreed and designated account. That obligation was owed to DAR and FNS individually, since a jointly enforceable duty would deprive an innocent party of the protection the clause was intended to provide. The reasoning was consistent with Catlin v Cyprus Finance Corporation (London) Ltd [1983] 1 QB 759.
5. Failure to agree an account. The absence of an agreed account relieved Aon of any duty to pay at that stage; it did not permit payment to one recipient alone. Aon should have withheld payment. If sums paid to Mr Sfeir were due under the agreement, DAR had a valid claim in damages despite no account having been opened.
6. The original order was defective because it adopted alternative bases, contained an inaccurate formulation of the revenues, implicitly determined breach while material issues remained open, and required further assessment. It had to preserve for determination the issues concerning non-aviation brokerage, the US$400,000 threshold and the amounts actually received.

• Court of Appeal (Civil Division): In [2004] EWCA Civ 921, the substantive appeal was dismissed, but the order below was directed to be reformulated.
• High Court, Commercial Court Division: HHJ Knight QC formally handed down judgment on 23 July 2003 and made an order dated 16 September 2003, holding that the remuneration agreement was binding and directing an account and payment.