Aerostar Maintenance International Ltd & Anor v Wilson & Ors

In assessing equitable compensation or damages for loss of a commercial opportunity, the court must determine the profit that would probably have been achieved by the claimant, rather than treating the actual financial failure of another operator as conclusive evidence that the contract was unprofitable. Contractual terms must be construed against the relevant background facts, including what the parties knew when contracting. A framework agreement covering identified services cannot generally be construed as applying to different numbers of aircraft for different parties where the defined terms are used consistently. Where a contractual price is to be adjusted by negotiation but no procedure is provided for disagreement, the parties are taken to have intended an objectively ascertainable reasonable rate. The assessment may require a broad evaluative judgment where the evidence leaves material uncertainty.

The claimants sought assessment of equitable compensation and damages following the liability judgment in the same proceedings. By the order reflected in the earlier judgment, the first defendant was liable for breach of fiduciary duty and contract, and the second defendant was liable for dishonest assistance, inducing breach of contract and conspiracy. The claimants elected equitable compensation rather than an account of profits.

The assessment concerned the profits which the first claimant would probably have made from the Galaxy contract for aircraft maintenance, including the number of aircraft within the contract, its likely duration, commission payable to the second defendant, and the rate payable to Romaero. The earlier liability judgment is cited as [2010] EWHC 2003 (Ch).

1. Assessment. The court rejected the defendants’ submission that Avman’s insolvency demonstrated that the underlying contract was loss-making. Insolvency could result from non-recovery of sums, unrelated or excessive overheads, litigation costs, poor financial management and the surrender of contractual margins. It was therefore not a reliable guide to the profitability which competent performance by the claimant might have produced.
2. Construction of the Galaxy contract. The agreement was a framework agreement whose scope had to be identified by reference to its terms and the background known to the parties. Although the documents referred in places to eleven aircraft, all parties knew before contracting that only eight aircraft would be sent to Romaero and that three would go to Garuda. The defined terms “Aircraft” and “Services” therefore referred to eight aircraft for the relevant rights and obligations. Escrow arrangements, registration numbers and invoices did not alter that construction.
3. Duration and rates. The court did not need finally to decide whether the renewal clause gave a unilateral contractual right to renew, because the parties accepted that the probable factual continuation of the work could be taken into account. The court assessed the calculations on a two-year basis, while allowing for uncertainty. A contractual provision requiring the man-hour rate to be adjusted by negotiation was construed as requiring an objectively ascertainable reasonable rate, capable of determination by the court if agreement failed.
4. Final assessment. The court rejected the assumption that the second defendant would surrender most of his contractual commission and allowed for uncertainty concerning the Romaero rate, renewal and penalties. The best estimate of profit was £800,000. Equitable compensation and damages were each assessed at 80 per cent, namely £640,000.

This was a further first-instance hearing in the same proceedings following the liability judgment.

• High Court (Chancery Division): liability was determined in the earlier judgment dated 30 July 2010, cited as [2010] EWHC 2003 (Ch). The present judgment assessed quantum.