Kama Aviation Company Ltd v Deir & Ors

A written commercial agreement is construed objectively, by reference to the meaning it would convey to a reasonable person with the relevant background knowledge. Negotiations and subsequent conduct cannot be used to interpret the agreement where the applicable principles exclude them. A commission calculated by reference to net profits from aircraft chartering may extend to all commercial charter income, rather than only business personally arranged by the claimant, where that is the proper construction of the agreement. Fixed annual costs may be excluded where the agreement requires monthly accounting and the commercial context supports calculating profit by reference to revenue less variable costs. An agent who receives an unauthorised secret profit must account to the principal.

The claimant, Kama Aviation Company Ltd, sought payment from Zaher Nicola Jeries Deir concerning aircraft management, aircraft-sale proceeds and an alleged secret profit. Mr Deir brought counterclaims for commission under a written agreement dated 20 December 2003 and for commission on the sale, and proposed sale, of a Boeing aircraft.

The central issues were the proper construction of the 2003 Agreement, whether it created an entitlement to commission on aircraft sales, whether any separate commission agreement existed, and whether a payment made by an aircraft maintenance provider was an unauthorised secret profit.

1. Construction of the 2003 Agreement. The court applied the objective approach stated in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896. The agreement required Mr Deir to operate and manage the Boeing and Legacy aircraft in a general supervisory capacity, not merely to arrange charter flights. Clauses 2 to 5 established operational and accounting arrangements but were not conditions precedent to payment.
2. Net profits. Mr Deir was entitled to 10 per cent of net profits from all commercial charter income attributable to the aircraft, not merely charters personally arranged by him. Private flights were excluded. The calculation was revenue less variable costs; fixed costs were not deducted because the agreement contemplated monthly accounting and the relevant fixed costs were generally annual or shared costs.
3. Aircraft-sale commission. The 2003 Agreement did not extend to the sale of the Boeing. No separate agreement entitled Mr Deir or Jet Connections Ltd to commission on either the aborted Inmaiyia transaction or the later TAG sale. The retained US$72,500 therefore had to be paid to Kama.
4. Secret profit. The US$40,000 payment from Lasham was a secret profit received without the principal’s approval. Mr Deir had acted as Kama’s agent in maintenance matters and owed fiduciary duties to it. Kama was entitled to an account of the profit, notwithstanding that Lasham’s invoice was addressed to SAMCO.
5. Judgment was entered for Kama for US$72,500 plus interest on the Boeing-sale proceeds and US$40,000 plus interest for the secret profit. Mr Deir was entitled to the net-profit amount shown in the parties’ schedule, subject to adjustment for prior payments and the period of loss claimed for 2008.