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OUTER HOUSE, COURT OF SESSION
[2007] CSOH 48
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CA5/06
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OPINION OF LORD CLARKE
in the cause
GIFTEX CORPORATION
Pursuers;
against
DIVEX LIMITED
Defenders:
________________
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Pursuers: Sheldon;
Maclay Murray & Spens, LLP
Defenders: McBrearty;
HBJ Gateley Wareing
2 March 2007
Introduction
[1] In
this action the pursuers aver that they carry on a business in Abu
Dhabi, United Arab Emirates
("UAE") as agents for the procurement of military equipment. The defenders are a Scottish company who inter alia manufacture diving equipment
both for commercial and military use.
The pursuers sue the defenders for payment of £392,992 or alternatively
£81,890 with interest thereon. The
pursuers claim that one or other of those sums is due to them by the defenders
under an agreement which is averred, in Article 2 of Condescendence, in
the following terms:
"In early June
1998 the defenders agreed with the pursuers that the pursuers should act as
exclusive agents for the supply of the defenders' 'stealth' rebreather products
to the armed forces of the UAE ('the UAE').
The agreement was made verbally.
It was made during a meeting between the pursuers and the defenders at
the Novotel Centre Hotel, Abu Dhabi. Present at the meeting were Dr Fouad
Aoudi acting on behalf of the pursuers and Mr Scott Jamieson acting on
behalf of the defenders. It was agreed
that the defenders would pay 10% commission to the pursuers on the base price
of goods ordered by the UAE. In
addition, the defenders agreed that the pursuers should receive all sums
charged by the pursuers to the UAE in excess of the base price."
[2] I
have emphasised the last averment as it was the focus of a great deal of the
controversy in this case. The pursuers
go on to aver "The defenders executed a letter 'To whom it may concern' dated 30 June 1998 confirming the said
agreement." That document, part of 6/6
of process, is signed by Mr Scott Jamieson of the defenders. It reads:
"Giftex are acting as agents for the supply of Stealth Rebreathers to
the Abu Dhabi Military and the Ministry of the Interior". The pursuers' esto case supporting the sum concluded for, in the second place,
is to the following effect:
"Esto there was no agreement between the
parties to the effect that the pursuers would be entitled to all sums charged
in excess of the base price (which is denied) the pursuers are entitled to
payment as second concluded for on the basis of the 10% basic rate of
commission agreed".
[3] The
defenders' averments in response to the pursuers' averments regarding the agreement
between them, are to be found, in Answer 2.
They are as follows:
"Explained and
averred that the defenders were first contacted by Dr Fouad Aoudi of the
pursuers in or about June 1998. The
pursuers indicated that they would be able to secure the sale of the defenders'
diving equipment to the UAE armed forces.
In consequence, in or about June 1998, the parties verbally agreed that
the pursuers would be authorised to act as agents for the defenders for the
supply of the defenders' 'Stealth Rebreathers' to the Abu Dhabi Military and
Ministry of the Interior. The parties
agreed that in the event of the Pursuers' procuring a contract, they would be
entitled to a commission of 10% on the sale price. There was no agreement between the parties to
the effect that the pursuers were to be exclusive agents for such supply. There was no agreement between the parties to
the effect that the pursuers would be entitled to all sums charged in excess of
the base price. The parties executed a
Minute of Agreement dated 31 March and 5 April 2000 ('the Minute of Agreement')."
The pursuers aver in Article 5
of Condescendence inter alia as follows:
"In about June
2003 the SOC '(a branch of the UAE Armed Forces)' placed an order with the
defenders for 24 stealth rebreathers and related equipment. The defenders issued an invoice to the SOC
for £1,291,130.... The said order was procured or materially contributed to by
the pursuers' agency. They are
accordingly entitled to commission at the rates agreed between the parties in
respect of their agency during the period 30 June to at least 7 April 2001. The pursuers were not informed about the
order from SOC until after 10 June
2003. In particular, the
defenders did not inform the pursuers that the order had been placed. On 23 December
2004 the pursuers intimated an invoice for the sum of £567,766 by
way of commission which is the sum first concluded for." (As will be seen the sum first concluded for
was subsequently amended).
The Evidence and Discussion thereof
[4] The
matter came before me for proof before answer.
The pursuers' principal witness was Dr Fouad Aoudi. He explained that he was employed by the
pursuers whose business was to supply Ministries of Defence with
equipment. This included medical
equipment, and mobile field camps. In
particular his company supplied the Ministry of the Interior and the Ministry
of Armed Forces of the UAE. From an
early point, in his evidence the witness maintained that the finalising of
contracts with these government departments might take up to between 2-5
years.
[5] In
mid-1998, Dr Aoudi had read an article in a British newspaper concerning
the manufacture by the defenders of military diving equipment which had, as one
of its most significant features that, while in use, it did not send bubbles to
the surface of the water in which the diving operations were being carried
out. That allowed for covert operations
to be carried out. Dr Aoudi told
the Court that he thought that the UAE authorities might well be interested in
purchasing such equipment. He,
accordingly, contacted the defenders. As
it happened the defenders had a representative, Mr Scott Jamieson, in the
region at that time. A meeting was,
accordingly, quickly arranged to take place between Dr Aoudi and
Mr Jamieson. It took place at
Mr Jamieson's hotel, the Novotel Hotel in Abu Dhabi,
on 2 June 1998. Dr Aoudi said that the meeting took place
in the lobby of the hotel. It is of some
significance to note, at this stage, that Dr Aoudi's evidence, as I have
it noted, consonant with what is averred in Article 2 of Condescendence,
was that the meeting took place only between himself and Mr Scott
Jamieson. That was, as will be seen,
also the position of Mr Jamieson in his evidence to the Court. The witness said that he indicated to
Mr Jamieson that he thought that the Special Operations Command within the
UAE Armed Forces ("SOC") might be interested in purchasing the equipment
described in the newspaper article and referred to as "stealth
rebreathers". Dr Aoudi said that
Mr Jamieson indicated that his company would be interested if Dr Aoudi
sought to obtain a contract for the supply of this equipment to the SOC. Discussion, he said, ensued between them as
to what payment might be made to Dr Aoudi's company for obtaining such a
contract. In examination-in-chief,
Dr Aoudi said that Mr Jamieson had indicated that the defenders
normally paid 10% of the sale price as commission. However the witness went on to say that
Mr Jamieson said that "You can have any addition to the price you
wish". Dr Aoudi said that he had replied
"Yes, that is what we are used to". He
had indicated to Mr Jamieson that his company would be looking for 30% of
the sale price in addition to any 10% commission and that Mr Jamieson had
agreed to this.
[6] It
will be noted that as the evidence developed, the alleged method of the payment
of 30% was not that the defenders would pay the pursuers 30% of the price
charged and received by them for the goods sold, but that the customer would be
charged 30% above the defenders' list price, as it were, and that the 30% would
then be received by the pursuers.
Dr Aoudi, in evidence, said that he asked Mr Jamieson to send
him further written material about the product.
That information was sent to Dr Aoudi and he said that, thereafter,
he transmitted it to technical persons within the armed forces.
[7] On
30 June 1998
Mr Jamieson faxed to the pursuers a document in the following terms:
"Attached
Agreement as requested for the supply of Stealth Rebreathers.
Agreement will
be valid for a period of six months from today's date."
The attached document was the "To
whom it may concern" letter referred to above (6/6 of process).
[8] Dr Aoudi
said that Mr Jamieson had also agreed with him that, in the event of a
contract for the purchase of stealth rebreathers being obtained, then the
pursuers would be appointed by the defenders as their agents on a more general
basis both with regard to territory and range of products. It was, thereafter, a running theme of
Dr Aoudi's evidence that he, his company, his colleagues, his family and
others acting on his behalf exerted extraordinary efforts in seeking to obtain
a contract from the SOC for the supply of the defenders' equipment. These efforts, it was said resulted in the
defenders being invited to make a demonstration to the SOC. In the first place a meeting was arranged for
Mr Jamieson with Colonel Suhail Al-Dhaheri, of the SOC, in late September
1998 at which Mr Jamieson carried out a power point presentation about the
defenders' product. Dr Aoudi did
not attend this meeting. Mr Jamieson
was accompanied by a Mr Al Akra of a company known as Al Badia. Mr Al Akra was a friend of Dr Aoudi
who initially, it appears, was engaged by Dr Aoudi to assist in securing
the obtaining of the contract. The
initial meeting with Colonel Suhail Al-Dhaheri was followed up with a full
demonstration of the operation of the defenders' equipment which took place
just outside Abu Dhabi. The demonstration took place on or about 19 November 1998. The equipment was tested by personnel who would
be using it in the event of its purchase.
Mr Al Akra brought Mr Jamieson and a colleague of
Mr Jamieson from the defenders, Paul Haynes, to the facility where the demonstration
was to take place, but he himself did not attend the demonstration. Dr Aoudi had made the necessary
accommodation arrangements for Mr Jamieson and his colleague. He had arranged transportation for them and
had arranged for the transportation of the equipment to the place of the
demonstration. In the meantime
Dr Aoudi and representatives of the defenders had continued to communicate
with each other regarding their contractual arrangements for the future. In particular there was an exchange of draft
agreements between the parties on 6 and 7 October 1998, 6/9 and 6/11, 12
and 13 of process, none of which was executed by the parties. None of these draft agreements referred to
the question of commission payable to the pursuers.
[9] In
early November 1998 Dr Aoudi was pressing the defenders' representative
Mr Jamieson and their sales director, David Smith for the execution of an
agreement to regulate the parties' relationship, both with regard to the range
of products covered and territories to be covered. A draft agreement then passed between the
parties. On 2 December 1998 Mr David Smith sent, under
cover of a letter, 6/20 of process, a version of the draft agreement which the
pursuers were not happy with. Inter alia it provided (6/18 of process)
as follows:
"3. Duration
Subject always
to the provisions of clause 8 hereof, the Appointment shall commence on
the date of signing this contract and shall continue for a period of Five years
thereafter until determined by either party giving the other not less than Six
months notice in writing subject always to the provisions on Clause 8
hereof.
....
6. Agents
Commission
(a) Agent may add his margin to the price of
Divex for the product, in this case there is no commission to the Agent for the
product, unless Divex should give his written approval for the commission. So, Divex must undertake to settle the price
difference between the quoted price to the Agent and the selling price to the
client by effecting telex transfer to the Agent's account within 7 (seven) days
after receipt of the payment (partial or complete) from the client.
(b) The Agent shall maintain adequate
records of all enquiries and transactions in relation to the Agency and shall
permit the Principal or its representative to inspect the same or (sic) any reasonable time."
At about the same time
Dr Aoudi telephoned the defenders to inform them that the military
authorities had agreed to purchase the defenders' stealth rebreathers. In reply, Mr David Smith of the defenders
faxed Dr Aoudi, inter alia in
the following terms (6/21 of process):
"Congratulations
on winning the order! It is excellent
news and obviously relied on much hard work and good effort from Giftex.
I enclose a copy
of the revised Agreement which I hope is now correct. I look forward to your visit to our premises
in Aberdeen for the official
signing of the Agreement.
We need to send
the Military a quotation for the equipment but need to confirm some details to
allow us to do this and I therefore ask you to respond with the following:
....
4. Commissions - Your request does seem
very high. It increases the price from
£25,000 to £36,526. We are concerned
that this is a very high market price and may cause us to lose orders in future
against our own competitors. I wish to
avoid any embarrassment in terms of pricing.
Could I therefore ask you to review your request for commissions at the
level stated and reduce them to lower percentages, as I believe this will be
necessary to give us the best opportunity for future business."
The attached draft Agreement
provided in clause 3 as follows:
"Duration
Subject always
to the provision of clause 8 hereof, the Appointment shall commence upon the
date of the official order from Abu Dhabi Armed Forces for a quantity of 24
Stealth sets and shall continue for a period of Five years thereafter until
determined by either party giving the other not less than Three months notice
in writing subject always to the provisions on Clause 8 hereof."
Clause 6 of the draft Agreement
provided as follows:
"Agent's Commission
(a) The Agent shall be entitled
to commission on the net revenue derived from provision of products within the
Area. The rate of commission to be agreed
between the Principal and the Agent on a case-by-case basis. Such rate of commission to be included in the
Principal's product prior to quote.
(b) The Agent shall maintain adequate
records of all enquiries and transactions in relation to the Agency and shall
permit the Principal or its representative to inspect the same at any
reasonable time."
[10] Two important features of Mr Smith's fax message require
to be commented upon at this stage. The
first is that the words "your request for commissions at the level
stated"(emphasis added) are totally at odds with the pursuers' case, as pled,
and as spoken to by Dr Aoudi in his evidence that the parties had agreed
conclusively the terms of commission to be paid to the pursuers, on or about
2 June 1998, at the meeting in the Novotel Hotel. The second feature is that as the evidence in
the case clearly demonstrated, and despite Dr Aoudi's repeated assertions
to the contrary, Dr Aoudi's claim in November/December 1998 that the SOC
had agreed to purchase the stealth equipment from the defenders and
Mr Smith's acceptance that this was so, were completely without
foundation. An agreement by the SOC to purchase
the stealth rebreather equipment did not come until almost five years later.
[11] Following on his fax message of 3 December 1998, Mr Smith sent a further fax on 7 December 1998 (6/22 of
process) which was inter alia in the
following terms:
"Further to our
telephone conversation of yesterday, I enclose for you a copy of our quotation
to the Abu Dhabi Special Forces for
the Stealth sets, spares and training. I
hope you find this all in order - if not, please do call me immediately.
1. I have increased the selling price as
discussed by the additional amounts requested - 10% 'Expenses', 15% 'other',
and 5% for 'negotiation'. A 10% commission is acknowledged to come off the base
selling price for Giftex Corporation.
These prices are
calculated by compounding the previous price e.g. if the base price is £100,
Giftex will receive 10% commission (Divex will therefore receive £90).
Add 10% Gross 'Expenses' to £100 =
£111.11
Add 15% Gross 'Other' to £110 =
£130.72
Add 5% Gross 'Negotations Fee' to
£129.41 = £137.99.
Please confirm
that your understanding is as above."
[12] Mr Smith, the author of that document, did not give evidence at
the proof. None of the witness who did,
including Dr Aoudi, and who was asked to comment on it, was able to
explain the arithmetical calculations contained therein. Be that as it may, attached to the fax was a
quotation dated 7 December 1998
addressed to the Director of Special Forces.
It quoted prices for the defenders' equipment which ex facie included significant uplifts to the defenders' base prices
for the equipment. The quotation ended
"We would like to discuss and agree a mutual acceptable delivery schedule, but
suggest a staged delivery with completion of the order within six months from
the placement of contract".
Dr Aoudi replied to that fax and the accompanying quotation in a
message dated 15 December 1998
addressed to Mr David Smith (6/23 of process). In it he said: "We have received your message & price
list by E-mail and we are going to send it very soon". There is no written evidence that that
quotation was ever sent to the special forces at or about that time by Dr Aoudi. Dr Aoudi, in evidence, appeared at first
to say that the documents had been sent to the SOC but then he said he could
not recall if this was so or not.
Dr Aoudi suggested that the level of "commissions" referred to in
6/22 of process was not very high.
Notwithstanding that, according to Dr Aoudi's evidence, the SOC had
by the beginning of December 1998 decided conclusively to purchase the
defenders' stealth products, it is clear
from what occurred subsequently that no such thing had been agreed. So on 24
February 1999 Dr Aoudi was writing to Scott Jamieson (6/24) in
the following terms:
"As I have promised you, today at 8.30A.M, we had a
very fruitful meeting with Colonel Suhail and others in the S F Committee. They thank us for our daily follow up and
support to them and of course for our Stealth Breather, and he shows us a very
good report about it from his people.
He has one urgent request, he wants us to make the 50
metre underwater test, before signing the contract."
Dr Aoudi then set out various other items of
equipment which it was said the Colonel had asked to see. He then continued, "because of this meeting
we are very happy today." In evidence,
Dr Aoudi said that at that time he was attempting to keep relations with the
SOC good to ensure that no competitor to the defenders would come on the
scene. That evidence, it should be
observed, hardly squared with his evidence that there was already a "done deal"
for the purchase of the defenders' equipment.
In due course a second demonstration of the defenders' equipment was
arranged to be given on or about 20 or 21 March by the defenders. The demonstration was given by Mr Scott
Jamieson and Mr Paul Haynes. As
previously noted it was attended by Mr Al Akra of the Al Badia Trading
Company. Dr Aoudi informed the
Court that the demonstration went very well.
He wrote to Mr Smith of the defenders on 3 April 1999 (6/37 of process) as follows:
"Since our very successful demonstration to the UAE
special forces, We are planning our marketing of your products in other
areas. I feel that we shall see some
positive response in the near future.
I feel that we should initially concentrate our
effort in Saudi Arabia. With your agreement, I will start promoting
the Stealth concept at a very high level.
This will sow the seeds for us to hit the operational people which will
be done by Scott and his team."
[13] On 21 April 1999 Dr Aoudi
wrote to Scott Jamieson in the following terms (6/39 of process):
"Our today's meeting was very good with Captain Khalifa,
and he said that they pass good report to the top levels and he told us to wait
for the order but we don't know when.
So, we are more confident about it and we might have something in hand
within two weeks."
Once again, Dr Aoudi in his evidence, did not appear
to be able to accept that the terms of that letter were obviously inconsistent
with what he had said in his assurance of late November 1998 that a decision
had been taken by the SOC to place an order.
As regards this particular document, the witness said that Captain
Khalifa had told him everything was fine and that he was going to send reports
to the top level so that matters could be carried forward. The SOC were also planning to visit the
defenders' factory in Aberdeen. On 23
April 1999 Scott Jamieson faxed Dr Aoudi advising him that the
defenders had heard from a customer in Germany
that they were to place an order for the stealth rebreathers. It was, therefore, he said "important to meet
the delivery period discussed with Abu Dhabi S.F. they place their order
soonest". He continued, "as I am sure
you understand I do not want to disappoint them" (6/40 of process).
[14] On 11 May 1999 Dr Aoudi wrote
to Scott Jamieson in the following terms (6/41 of process):
"Regarding the Stealth order approval, yesterday we
have received the news, that already approved and pass to Purchasing department
to prepare the contract. It may take
another one to two weeks and they might contact us or contact you direct."
[15] I am
satisfied that, on the evidence, as a whole, that what was said in that letter
was a complete misrepresentation by Dr Aoudi of the position at that
time. In his evidence, the witness
initially said that any such purchase required the consent of the Crown Prince
and that matter took some time. He
maintained that the SOC had agreed to buy the equipment subject only to
clarification of certain "routine matters".
He went on to say that he had told Mr Jamieson in May 1999 that the
Purchasing Department had said that while the decision had been taken it may
take another year for the matter to be finalised but if they were lucky it
might be concluded in three or four months.
It all depended on "the queue". I
disbelieved this evidence. Nothing of
this sort was said by Dr Aoudi in the correspondence which forms the
productions in the case.
[16] Mr David
Smith of the defenders wrote to Dr Aoudi on 13 May 1999 (6/42 of process) in the following
terms:
"I am disappointed to note that you indicate perhaps
another two weeks are required before a contract will be in place. Please excuse my scepticism but is this
likely to be delayed even further, or do you feel that we will see some
concrete progress in terms of an actual contract?
I am pressing on this as we are trying to plan
production for the rest of this year and such an order would have a fair
impact. We are similarly awaiting
decisions out of a number of other countries on Stealth and would not wish to
disappoint or delay on delivery to your country. Is there any additional help or assistance we
can offer?"
[17] Dr Aoudi
claimed that he had been phoning Mr Smith almost every day to reassure him
and to ask him to be patient. He told
him, he said, that it was 100% certain that the order would be forthcoming but
that it might take 11/2 to 4 years to be finalised. He went on to retract what he had previously
said as regards consent to the contract being required of the Crown
Prince. That, he accepted, was only
required in relation to contracts of higher value.
[18] On 26 July 1999 Dr Aoudi wrote
to Scott Jamieson (6/43 of process) as follows:
"There is a confirmed order for the Stealth Breather
and it's still on the desk of the Brigadier and waiting his signature. But, unfortunately he is away from the
country and every body is expecting him to come back and sign so many things
for other companies also. We are
following day by day, so just be patient.
Everything is out of our hand and SOG (sic) peoples hand. Again we confirm that there is a confirmed
order for the above, so just be patient."
Having regard to the ordinary meaning of the words
"confirmed order" the statements in that fax, in my judgment, were untrue and
this was simply one of many examples of Dr Aoudi seeking falsely to
impress upon the defenders that matters were being, or had been, achieved. In any event, on 8 August 1999
Dr Aoudi wrote to Mr Jamieson as follows (6/44 of process):
"We would like to inform you that the Brigadier come
back to the country and he will start his work tomorrow. Now we are trying to get an appointment with
him next week, if possible. As soon as
we will let you know after getting the appointment with him."
[19] Dr Aoudi,
in evidence, said that the appointment was to be fixed to enable
representatives of the defenders "just to go to see how things were
going". The SOC had, he said, decided to
send a delegation to the defenders' premises in Aberdeen,
before concluding the contract. On 7 October 1999 Dr Aoudi
faxed the defenders (6/45 of process) asking for quotations for various items
of equipment. The defenders considered
that some of the quantities involved looked somewhat strange. They replied by fax 6/46 of process as
follows:
"I regret that the lack of information provided makes
it extremely difficult to identify your clients requirements. We need more detail to be able to quote correctly. Do they really want 30 video cameras and 20
compressors?"
[20] Notwithstanding
the significant delay in any order actually emerging from the SOC, the
defenders were apparently prepared to continue, in the meantime, to deal with
the pursuers and both parties executed an agreement on 31 March and 5 April 2000, a copy of which is
7/11 of process. That agreement, in some
respects, follows the pattern of previous drafts which had been circulating
between the parties but which were never executed, and it included the
following clauses:
"2. Appointment
The Principal appoints the Agent to be its agent for the area defined in
Annex A for all enquiries from companies and organisations as are
specified and included on the Annex B, for deliveries of products offered
by the Principle (sic) (details of
which are set out in Annex C), and such other products as may hereinafter
be mutually agreed (and added to Annex C) and the Agent hereby agrees to
act in that capacity.
3. Duration
Subject always to the provisions of clause 8 hereof, the Appointment shall
commence upon the date of the official order from the Abu Dhabi Government for
a quantity of 20 to 24 Stealth sets and shall continue for a period of 3 years
thereafter, after which shall be reviewed, until determined by either party
giving the other not less than three months notice in writing subject always to
the provisions on Clause 8 hereof."
[21] Clause 6
of the Agreement provided:
"Agent's Commission
The Agent shall be entitled to commission on the net revenue derived from
provision of products within the Area and is only due upon receipt of the full
invoiced amounts due from the customer.
It shall be paid within 30 days of receipt of funds. The rate of commission to be agreed between
the Principal and the Agent on a case-by-case basis. Such rate of commission to be included in the
Principal's product price prior to quoting the customer. A 'Commission Form' as shown in Annex D shall
be submitted and signed by both parties for the avoidance of confusion,
otherwise no commission shall be paid".
[22] The terms
of clause 3, it may be observed, were entirely inconsistent as
Dr Aoudi would have had it in his evidence that an order for 24 Stealth
sets had already been in existence at the time of the execution of this
Agreement. The number 24 had been the
agreed figure between the parties from the earliest stage of their dealings and
represented what it was thought was the requirement of the SOC.
[23] As
previously noted the pursuers had engaged with a company known as "Al Badia" to
assist in seeking to obtain the order from the SOC. The defenders were made aware of this and on 29 June 2000 they provided the
pursuers with a letter (6/49 of process) confirming that "it is permitted for
Giftex Corporation or Aoudi Group to appoint a third party to work with Divex
in securing the order for Stealth products".
In due course, in circumstances explained by witnesses for the
defenders, the defenders appointed Al Badia as their representative dealing
with UAE Government representatives.
They did so by letter of 20 October
2000 (6/50 of process) which is signed by the defenders'
Mr Douglas Godsman. The letter is inter alia in the following terms:
"Further to our various meetings in Abu
Dhabi, I am now pleased to confirm our understanding
of our basic agreement regarding representation and relevant commissions
payable:-
1. Stealth
Re-breather enquiry from Special Forces - Equipment only.
We confirm this is to be re-bid to GHQ as per their specific requirements and
that we shall include 10% commission for yourselves in our prices. That is we shall add that amount on to our
basic net price before arriving at any finally quoted price. This would apply to the prices for the actual
Stealth Set and not to training/servicing amounts etc.
This arrangement would apply only to the re-bid due
to be submitted within the next week and would not necessarily apply to any
further re-bid which may be required. In
that case the commission level may require to be reviewed.
You are already aware that we may have to provide for
a contractual liability to Giftex in this case.
It was agreed that in the event that we agree a percentage for them in
this case, 50% of that amount would be deducted from the consideration due to
yourselves.
2. All
other sales of equipment and services to Special Forces, Navy,
Coast Guard and ADPOC
We confirm that for a trial period of one year from 1 October 2000, we shall include 5%
commission for yourselves in our prices.
That is we shall add that amount on to our basic net price before
arriving at any finally quoted price.
This arrangement would be reviewed on 30 September 2001 and a further
agreement would be made in light of overall success achieved.
3. All
commission amounts would be payable upon receipt by us of payments from
customers.
4. It
was also agreed that we may have the use of office facilities during our Sales
etc visits. It is proposed that this
would not be charged for except for Telephone and other actual communications
costs.
5. All
quotations are to be made directly by Divex Ltd. Badia Trading will however use their very
best endeavours to ensure that we are invited to quote for all relevant enquiries
from the establishments identified above.
.....We look forward to a long and successful association with Badia
Trading".
[24] Dr Aoudi
in evidence accepted that Al Badia had contacts with the Military which he and
his company did not. He claimed, also,
in his evidence that Al Badia would have told him of the content of 6/50 before
it was executed. He also claimed that up
until its date everything had been going fine as to the processing of an order
for the defenders from the SOC. The SOC
were about to send a committee to Aberdeen. The appearance of the appointment of Al
Badia, however, he said, upset everything.
The SOC were surprised and said there was a conflict of interest. Matters were delayed as a result because the
Commander of the SOC has said he had lost trust in the defenders. Undaunted, however, Dr Aoudi made
arrangements with another company, with whom he had had previous dealings,
namely Neibal, who also, he claimed had close connections with influential
persons in the Military. On 9 December 2000 he faxed
Mr Smith of the defenders in the following terms (6/51 of process):
"We would like to inform you that, we have succeeded
with our new partners to market and sell Divex products to the UAE Special
Forces and this order of Stealth Re-breather and other orders are ready and
waiting you to come so we can go together and receive them.
You should know that from the first time we have
contacted you and asked you to come to Abu Dhabi and received you in our office
and guest house and introduced to the end user, we were very serious to obtain
all orders and make a good cooperation with our two companies, but what delayed
these orders was the middleman who was in between us and the end user and it
was for the reasons, we will explain it to you in details when we meet face to
face.
We can guarantee you that our new partners are very
well connected and powerful and they are the best of all even more than what
you can expect. The End user have
promised to give us all current and future orders and without any delay. I have told Mr Scott about all this information
three months ago and asked him to come to meet with the new partners and to go
with them to the end user to push this and other orders.
We have informed you that, we are going to have a new
partners with us and you have agreed and send your approval for that.
We are always ready to work with you and serve you."
[25] The
reference to the "middleman" in that document, was, as Dr Aoudi said, in
evidence, a reference to Al Badia. On 14 December 2000 Dr Aoudi
faxed Mr Smith once again (6/52 of process). He wrote, "We and our partners are waiting
your arrival to Abu Dhabi, so we
can go together to collect the two orders."
On the same day Mr Godsman of the defenders faxed Al Badia in the
following terms (6/53 of process):
"Please note we are being inundated with faxes and
telephone calls from Dr Fouad H. Aoudi and a copy of the latest fax is
attached for your information. We have
so far had no contact whatsoever from the Special Forces regarding our
quotation. I am now under pressure from
our Managing Director to secure these orders and he is suggesting that we
should perhaps use Giftex to secure them.
Unless I hear from you or the Special Forces within
the next two days, I will have no alternative but to pursue other means which
may be at my disposal. This arrangement
would cancel any agreement which we have made, on the basis that no results
have so far been achieved. Please give
this matter your urgent attention."
[26] On 20 December 2000 Dr Aoudi wrote
to David Smith (6/54 of process). He did
so inter alia in the following terms:
"Please be informed that;
Using other channels or going through indirect ways
or using other persons will take no where and will complicate things and reach
a dead end only. So, kindly we ask
you to stop all these means in your own deplomatical (sic) and reasonable ways.
We can guarantee you our stealth order and other much
valued orders are waiting for you to arrive to Abu Dhabi. So we can go together and collecting them."
This elicited the following response from Mr Godsman
dated 22 December 2000
(6/56 of process)
"Please desist from sending messages and telephoning
Scott Jamieson (who no longer works for Divex) and to Mr Smith who is not
dealing with this matter. Your constant
messages are doing no good at this time.
Please also note that your reputation is done no good when you tell
Mr Smith that you have the orders on your desk and then we get a fax from
SOC two weeks later clearly proving otherwise.
Please be patient on this matter as we do all that we
can to negotiate an order from SOC. As I
have already confirmed, we acknowledge that you are entitled to a commission on
this order and I will personally ensure that it is not less than 10%. However this will only happen if we ever get
an order. In the event that it is
necessary to visit UAE again this will quite possibly be in January and I will
definitely advise you of our travel details prior to this in order that we may
arrange a meeting."
[27] On 16 December 2000 Brigadier Al
Bawardi, the Commander of the SOC, faxed Paul Haynes of the defenders (6/55 of
process) in the following terms:
"We have reviewed your proposals and have the
following requests:
(a) Please
accomplish your survey or our re-compression chambers and prepare a proposal
for us. This survey is to be
accomplished at your cost and the SOC will make our facilities available.
(b) Technical
Training Courses. Please review this proposal
making the requested changes at the attachment.
Please also add the Gas Mixture Training Course within this
proposal. Please reduce the prices and
then submit it back to the SOC as a separate proposal.
(c) Equipment
items for the SOC. Your prices are
viewed to be extremely high. Please
ensure to provide a detailed listing of all special tools and equipment required
to maintain these items. Please
reconsider these prices and submit a proposal back to the SOC.
We would appreciate a proposal back to after the
first of the year."
[28] Dr Aoudi,
in the meantime, on 25 December
2000 replied to Mr Godsman's e-mail to him of 22 December 2000. He did so in inter alia the following terms (6/57 of process):
"We have never said that the stealth order is on our
desk. We have told Mr Smith to come
to Abu Dhabi, so we can go together
to the SOC to facilitate him in getting the order and to prove that we are
behind the success of getting the order and we still keeping our word that we
can go together and get the order as promised.
.... I thank you for your
assurance of my 10% commission, but we can discuss this subject when you come
in Abu Dhabi."(Emphasis
added).
Towards the end of the fax Dr Aoudi wrote, "our
reputation can (sic) be questioned
and we are not the one who should talk about it, but I can give you some
references and you can call and ask them about our reputation". He proceeded to give the names of two
companies.
[29] Mr Paul Haynes
replied to the points raised by the Brigadier in 6/55 of process by faxes dated
8 and 11 January 2001, 6/58 and 6/59 of process. These communications included detailed
quotations of prices of equipment and other services. Those communications were promptly replied to
on 10 January 2001
(6/61 of process) by Captain Al-Kaabi of the SOC. The reply was in the following terms: "We are please to inform that we are waiting
for more quotations from other companies.
We'll advise you of the action taken regarding the quotation submitted
to you." Somewhat extraordinarily, to
the ears of the Court at least, Dr Aoudi maintained, in
examination-in-chief that the terms of 6/55 and 6/61 of process meant that the
order was going to the defenders. He
maintained that there were no other competitors to the defenders. He knew that himself he said. There was only one possible competitor, a
German company known as "Dragor" who did not have the relevant technology to
meet the SOC's requirements.
Dr Aoudi said that he drew the conclusion that the purpose of 6/61
of process was to "scare" the defenders a bit.
Mr Godsman of the defenders took up matters again with
Dr Aoudi by fax message dated 2 February
2001 (6/62 of process). He
made the following points:
"Please note that in order to move this issue forward
Paul Haynes and myself may be prepared to re-visit Abu
Dhabi. In that
event and in view of your various communications over the past couple of months
I would ask you to confirm the following:-
(1) You
have mentioned now many times that if we are to return to Abu Dhabi and meet
with various parties the net result will be that we shall receive confirmation
of the Stealth order during that meeting or at least immediately thereafter.
(2) That
you can arrange a meeting with both your partners and Brigadier Juma
Bawardi together for the purposes of achieving the above. This meeting should be held outside the SOC
headquarters.
(3) That
in the event this visit does not produce the order confirmation, you will re-imburse
50% of our travel costs and that you will relinquish any further involvement in
representation of Divex Ltd.
I believe that I basically summarised your
suggestions/undertakings from previous correspondence.
I look forward to receiving your confirmation of 1 to
3 above by return."
The reply to this was a fax from Dr Aoudi (6/63 of
process):
"(1) We are
still in our word and optimistic of the net result that will come out of the
meeting with the concerned people, even though this was almost two months ago.
(2) Meeting
with our partners and Brigadier will be arranged for sure, but we never
promised any meeting with him out side SOC Head Quarters and that's where we
will meet him.
(3) As we
mentioned before, your stay will be on our account and if you wish we can pay
the 50% of your visit, even if you are awarded the order. Regarding our agreement, we will discuss this
during your stay in Abu Dhabi."
[30] On 21 February 2001 Mr Godsman faxed
Dr Aoudi (6/66 of process) asking him as to the availability of the
Brigadier over the period from March 1-8.
Dr Aoudi replied on 24 February 2001 (6/67 of process)
suggesting that the meeting with the Brigadier should take place some time
after 10 March. Mr Godsman on 13 March 2001 e-mailed
Dr Aoudi (6/69 of process). He
wrote:
"I would propose to visit on 24/25 March on my return
from India....
Please advise if this suitable. Please
also advise if we are to receive a letter from the Brigadier inviting us to a
meeting with a view to 'finalising' this ongoing issue.... Your early response will
be appreciated. During this visit I will
finalise all arrangements with Giftex/Badia although I remain unconvinced this
will ever result in an order!".
[31] Mr Godsman
followed up that e-mail with another (6/70 of process) dated 26 March 2001
which was in the following terms:
"I am surprised that you have not responded to my
earlier messages regarding a possible visit to meet with the Brigadier. As it happens my plans have changed and I now
expect to be in India
week commencing 2nd April and would therefore plan to be in Abu
Dhabi around 7th April."
[32] Dr Aoudi,
in evidence, said that in the meantime he had been arranging a meeting with the
Brigadier for 3 April but that Mr Godsman had tried to postpone
it. Be that as it may, Dr Aoudi
e-mailed Mr Godsman on 31 March
2001 in the following terms (6/71 of process):
"Ref. to our telephone conversation last week, until
now we didn't get your confirmation to come to Abu Dhabi on 3rd of April to meet with His Excellency Brigadier
General Jumaa Al-Bawardi, and as he set an appointment for you on Tuesday, 3
April 2001 at 10.30am.
I hope that you will be in Abu
Dhabi at this time, because we are going to hear the
good news which we have been waiting for and which we have worked together for
it very hard.
We hope that you will not listen to any advise (sic) from
others, which will keep you from coming to this meeting, because this could
delay our efforts again."
[33] Dr Aoudi
explained, in evidence, that the "good news" referred to in that communication
was good news about the contract since the Brigadier would say that he would
now send a committee to check everything.
The meeting with the Brigadier was re-scheduled to 7 April (see
6/72 and 73 of process). In his
evidence-in-chief, Dr Aoudi was remarkably uncertain and vague about the
meeting with the Brigadier. In
particular he said that he could not remember if he himself had attended. It was clear that the military authorities
continued to be uncertain about who in fact was representing the
defenders. Accordingly Mr Godsman
wrote to the pursuers on 25 May
2001 in the following terms (6/75 of process):
"Further to our conversation on Thursday, I write to
confirm that the current status of representative in UAE for SOC has been fully
discussed by our Board of Directors and following that we propose the
following:-
(1) In
view of the fact that SOC say they do not wish to move forward with the Stealth
order until Representation is clarified, it is imperative that this is dealt
with immediately in order to remove this barrier. If it does not move forward as a result of
that, I think we can all stop getting upset about it!
(2) Badie
(sic) have been given an undertaking
for representation but this expires on 30th September 2001 and in
order to deal with this issue it is proposed to confirm that this in place to
SOC and to clarify that until that date Al Badie (sic) are our representatives.
A copy of that communication would be given to you.
(3) As
already confirmed your are entitled to a 10% commission on the prices already
submitted.
(4) In
the event that we receive an order before 30 September 2001 for Stealth we shall of course honour
our commitments to Al Badie (sic) (this
will be 5%). We would not however be in
a position to make any other consideration for Neibal Group and this would be a
matter for you to deal with. We have no
official agreement with them at this time but future potential will be covered
in (6) below.
(5) In
the event that no order is forthcoming during that time, the double
representation issue will dis-appear.
(6) It
would be our intention to formulate a new agreement with Neibal Group effective
1st October 2001. your guidance) for future representation. This would be for a specific period and
subject to certain success criteria.
Please give me your thoughts on this as soon as
possible. I wish to clarify the position
to SOC this week."
Mr Godsman sent a reminder to the pursuers of this message
on 1 June 2001. This elicited the following e-mail response
from Dr Aoudi dated 4 June
2001 (6/77 of process):
"Thank you for your e-mail, as I informed you before
that in order not to harm your business and to let things go towards a fruitful
results, I am fully agreeable with your
suggestion to continue with, and fulfil your commitments with Al Badia Company
till 30th September 2001. At
the meantime, I have discussed this matter with Neibal Group & convinced
them to accept your suggestion. They do
not have any objection to wait till October 1st
2001. It is preferable, if
you can propose them a draft of representation agreement for negotiation (send
it to me & I will handle the negotiation with them) till your agreement
with Al Badia expires. Moreover I will
split my commission from this deal (only this deal) as follows:
- (5%) is for covering GIFTEX all expenses (Follow up
expenses for the past two years, communications, public relations, traveling....
etc.) and Other arrangements.
- (2.5%) to Neibal Group (this will be arranged
between me & Neibal).
- (2.25%) for GIFTEX as profit margin.
This will help a lot to bring things into the right
track. You may go ahead with SOC and
clarify your position in this regard, but I prefer to get your draft letter, which
you will address it to SOC, before you sent it."
Mr Godsman replied e-mail of 5 June (6/78 of process)
in the following terms:
"Please find attached draft letter to SOC.
I will propose an official agreement for Neibal to
take effect from 1st October within the next few days. It will basically follow the same format as
the one you have but with duration and territory extension directly related to
success."
Dr Aoudi, in examination-in-chief, said that that
letter entirely reflected his own agreement on the matter. The draft letter attached to
Mr Godsman's e-mail was addressed to the Brigadier at the SOC and said as
follows:
"This letter is to officially confirm that our sole
representative for Divex products and services to the SOC is Al Badie (sic) Establishment and specifically
Khalifa Harib Alkhaili. We can
further confirm that no other individual or Company is authorised to represent
us in any matters whatsoever.
We would apologise for any confusion which may have
arisen in the past and trust that this clarification is now clear for all
concerned. For your further information
our Commercial agreement with Al Badie (sic)
Establishment is due for reconsideration on 30th September
2001". (emphasis added).
[34] Dr Aoudi
e-mailed Mr Godsman on 6 June in the following terms (6/79 of process), "Please
go ahead with your letter and try to send us the draft of agreement as
mentioned." In examination-in-chief,
Dr Aoudi said that the Neibal Group belonged to "VIP persons". The pursuers, he said, were to be partners
with Neibal for the project. He was
working with the defenders but at that stage he was happy to have Neibal seek
to finalise the project, ie. the Stealth order, and to push it forward. His reference to VIP persons, he said, was a
reference to "sheikhs". A draft
agreement between Divex Limited and Neibal was sent to the pursuers by
Mr Godsman (6/82 of process). It
was in similar terms to that which had been provided to the pursuers. Dr Aoudi said he gave the "green light"
to Mr Godsman to send this to Neibal. On
29 November 2001
Dr Aoudi wrote to Mr Godsman suggesting certain changes to the draft
agreement with Neibal (6/83 of process).
He concluded "do your best to make these changes as soon as possible so
we can sign and start working on this project and finalize it." (emphasis added). So far as written communications lodged in
court are concerned, there is nothing else produced passing between the parties
until an e-mail from Mr Godsman to the pursuers dated 14 May 2002 (6/84 of process) in which he
wrote:
"I am sure that you will be aware that we have had
absolutely no result from our association with Neibal Group. In fact all we have received (after asking
about seven times) is information to the effect that the SOC have placed an order
with an american company for equipment and that we had lost the order. We have asked for clarification and further
information and again have received no replies.
Clearly under these circumstances there is absolutely
no intention on our part to extend our agreement. (It) is up for review at the end of this
month."
[35] Dr Aoudi
accepted, in examination-in-chief, that any agreement with Neibal and the
defenders had expired in May 2002. He
had, however, he said, learned from Neibal that a new company belonging to the
same family as owned Neibal was coming along "which would handle
everything". He did not consider he
needed to do anything more as his commission would be protected. The new company turned out to be a company
known as "IGG". When asked if the
involvement of that company made a difference to the status of the order, he
replied, "yes because the new company belonged to well represented
people".
[36] In the
course of 2004, Dr Aoudi ascertained that the SOC had placed an order for
Stealth equipment from the defenders. He
managed somehow to obtain an invoice issued by the defenders for the order
which is 6/85 of process. On 23 December 2004 he wrote to Mr
Godsman (6/86 of process) congratulating the defenders on obtaining the order
and submitting an invoice for payment to Giftex of £567,766 which he claimed
represented commission due. A reminder
was sent by Dr Aoudi on 24
January 2005 (6/87 of process).
On 3 January 2005 lawyers representing the defenders wrote to
Dr Aoudi (6/88 of process) rejecting the pursuers' claim.
[37] Dr Aoudi
when asked about the make-up of his invoice (6/86 of process) was unable to
explain the calculation. On returning to
court, after an overnight adjournment, he advised the Court that he had spoken
to his accountants overnight, who had prepared the invoice. He then endeavoured to explain what he
thought his accountants had told him but he did not do so with much
clarity. It did appear that the
calculation of the commission being claimed was made, at least in part, by
reference to prices set out in the defenders' quotations of 1998 and 2002. His position, in any event was basically that
the price paid to the defenders had included 30% above the base price of the
equipment plus 10% commission which he said he was now entitled to recover from
the defenders. IGG, he said, had not
introduced the defenders to the SOC nor did they do any of the initial work to
present to the SOC the defenders' product.
His last remark, in evidence-in-chief, was that the deal would never
have taken place without his introduction.
[38] In
cross-examination Dr Aoudi said that when he made his approach to the SOC
at the outset they wanted to know if he was well organised and if there was a
problem with any ensuing contract he could assure them that this would be
sorted out. He accepted he was not known
in the SOC until he started acting for the defenders, though he claimed to be
well-known in the Ministry of Defence and the Ministry of the Interior. He insisted that he told the defenders from
day one that the conclusion of a contract might take up to five years. He said he did not, as a non-technical man,
know how many versions of the Stealth Rebreather equipment there had been
between 1998 and 2003. He accepted that
the pursuers were never to get an enforceable agreement with defenders, to act
as their representatives, beyond getting an order for 24 stealth rebreathers,
until the pursuers obtained a signed contract for 24 rebreathers. That was the condition upon which the
Agreement (6/47 and 7/11 of process) turned.
In cross-examination Dr Aoudi was at pains, again, to stress the
work he said he had carried out on behalf of the defenders in seeking to obtain
a contract for the purchase of the Stealth equipment during the period 1998-1999. As I have already indicated, I consider a
good deal of this evidence to be grossly exaggerated. He maintained that members of his extended
family it seemed were engaged almost continuously on the project working with
him and others seven days a week, 365 days a year on the matter. While he maintained that the first contact
with the SOC was made by him he accepted that the involvement of Al Badia
thereafter helped matters in this respect particularly because the owner of
that company had been a General in the army.
He accepted that he did not himself attend the first presentation
carried out by the defenders in October 1998 or the demonstration which
followed in November 1998. Again he
admitted that he had not been at the further demonstration which took place in
March 1999 and that those occasions were attended by Mr Al Akra of Al
Badia. His own role, he said was to
bring the defenders to Abu Dhabi,
to discover who, if anyone, were their competitors and to make a strategy. It was a feature of his evidence that
Dr Aoudi refused, at first, to name
anyone who he said he dealt with in the SOC.
[39] The
witness's attention was drawn to 7/4 of process. This is a letter from Al Badia addressed
to Mr Smith of the defenders. It is
dated September 30, 2000. It states inter
alia, as follows:
"First of all, I will brief you our relations with
Giftex. Badia and Giftex were working
together on this deal. Giftex was in
contact with you and we were doing all the rest in Abu
Dhabi. We were
making contacts with the client and I accompanied Mr Scott Jamieson in all
the presentations and demonstrations made with the client so far. Mr Scott will give you full details of these
facts. Even we took the offer from you
and submitted to the client in our company's name and client knows; Badia is working on this project and they are
contacting us for further action. On
your expected visit, when you will meet the client, you may submit your offer
directly in your company's name.
Agreement between you and Giftex has already expired. I had previously mentioned this to Mr Scott
to cansell (sic) this agreement and
make a new agreement with Badia United Trd. Company."
[40] Dr Aoudi
said that what was therein stated was not entirely true and Mr Al Akra
had been following his instructions.
Dr Aoudi said that he arranged the meeting with the Brigadier and
the defenders and representatives of Neibal in April 2001 but, once more, could
not remember if he himself attended. Neibal,
he said was more important than he was because they were VIPs from "the
family". He did not think that he
attended the meeting with the Brigadier.
[41] He
disagreed that nine months was the normal time to elapse between the
introduction of a supplier like the defenders to the SOC and the placing of an
order if the SOC were interested in the supplier's product. He continued to maintain, under reference to
6/21 of process, that as at 3 December
1998 the defenders had won an order from the SOC for the purchase
of the stealth equipment. Expanding upon
this he said that he had been told that the SOC wanted to buy 24 stealth rebreathers. Their technical committee had made a
recommendation to that effect. The
witness said that he believed that at that stage the order was the defenders. I should say, at this point, that for reasons
already given, and to be elaborated upon, I do not accept that the witness had
any basis for such a belief, if it be the case that he had such a belief.
[42] Dr Aoudi
maintained that the defenders should have understood that the order was
definite at that time but that completion might take 1-2 years. He said the defenders knew from day one that
this was to be the position. I do not
accept that the defenders were informed by Dr Aoudi in such terms. Dr Aoudi said he saw no difference
between an order and a completed order.
An order meant "what they wanted to buy". In cross-examination Dr Aoudi,
furthermore, insisted under reference to 6/43 of process that, as at 26 July 1999, there was a confirmed
order for 24 stealth rebreathers.
What emerged in 2003, he said, was that order with "little
variation". He, however, claimed that a
visit by the SOC's representatives to the defenders' premises was an essential
step before the finalisation of any order and that he had told the defenders
this. Under reference to 6/44 of process
the witness said he believed that, as at 8 May
1999, there was "a concluded contract" lying on the Brigadier's
desk waiting to be signed. At other
times in his evidence, in cross-examination, the witness seemed to seek to
distinguish between a confirmed and a concluded order, a distinction which I
was unable to understand. He maintained
that he personally had met the Brigadier twice.
While, on the one hand, Dr Aoudi said that he was not happy with Al
Badia, "his partner", going behind his back and entering an agreement with the
defenders, he said that he blamed the defenders for this and that he did not
mind Al Badia "trying their strength".
He was watching events and knew what was going on. He, somewhat remarkably, said, at one stage,
that he had no problem with Al Badia "trying to steal the business". He then described the defenders as being his
partners not Al Badia.
Al Badia had told him that the pursuers' agreement with the
defenders had expired. Dr Aoudi
said that he learned of the existence of the agreement between the defenders
and Al Badia from the SOC who were getting concerned as to who the
defenders' representatives were.
However, he informed the Court, before learning of the agreement between
the defenders and Al Badia he himself had approached the Neibal Group to
take them on as new partners.
[43] When what
he wrote to Mr Smith in his fax of 9 December
2000 (6/51 of process) was put to the witness, namely:
"We would like to inform you that, we have succeeded
with our new partners to market and sell Divex products to the UAE Special
Forces and this order of Stealth Re-breather and other orders are ready and
waiting for you to come, so we can go together and receive them."
he indulged in some blatant prevarication but, ultimately,
maintained there was a final contract for the rebreathers. Under reference to 6/52 of process, however
the witness said that reference to "the two orders" was a reference to "a
letter of intent" from the SOC to the defenders confirming that they wanted to
purchase 24 stealth rebreathers and were requesting the defenders to give the SOC
their bank details or to set up a letter of credit. The witness, immediately, however went on to
say that there was no such letter of intent in fact because the SOC wanted a
revised offer. When writing as he did to
Mr Smith on 19 December 2000
(6/54 of process) he was convinced that the SOC wanted to purchase the stealth rebreathers. The witness said that he was asking the
defenders not to rock the boat and to go with Al Badia. He again maintained that at that time there
were actually orders waiting for the defenders.
He accepted that in Nos. 6/56 and 6/57 of process under reference to
"commission" both parties were talking only of 10% and there was no reference
to any uplift but he claimed that there was no need for this to be expressly
mentioned in these communications.
[44] Dr Aoudi,
under reference to Captain Al-Kaabi's fax to the defenders' Paul Haynes of 10 January 2001 (6/61 of
process) said it was this document which indicated that there was a definite
order. It appears to me quite
inexplicable how he could maintain that the terms of that fax had that effect. It was not the case, he said, that there was
never any order prior to 2003. While he
could not recall if he himself attended the meeting with the Brigadier in April
2001, he said that the purpose of the meeting was for the Brigadier to tell the
defenders that the order was theirs, perhaps subject to small variations which
had to be agreed. Arrangements were to
be made to send a delegation of the SOC to Aberdeen. The Brigadier had also asked for
clarification as to who was representing the defenders.
[45] Dr Aoudi
did not agree that the content of 6/77 of process indicated that at least by
that stage, the commission payable was to be only 10% on any concluded deal
with the SOC. The "uplift" he said was
already agreed and included.
Dr Aoudi accepted that no contract for the purchase of stealth rebreathers
was obtained by Neibal. They had left
matters to be concluded by the new company IGG.
The witness said he felt no need to contact the defenders between
November 2001 and December 2004 because there was nothing else for him to
do. He said that his "aeroplane had already
landed". He knew that the order was
"going through" with the company IGG. He
did not want to disturb things.
[46] Counsel for
the defenders in cross-examination re-visited the first chapter of events
namely the meeting between Dr Aoudi and Mr Scott Jamieson on 2 June 1998. That meeting, according to Dr Aoudi,
lasted three hours. Scott Jamieson had
said that he was the decision maker in respect of that part of the world. The witness said that Scott Jamieson agreed
that Dr Aoudi should be the defenders' representative. He agreed 10% commission and "any uplift I
could get". The witness disagreed that
the meeting involved only initial discussions.
Mr Jamieson did say that matters would require to be confirmed in
writing by his superiors. Dr Aoudi
said that he showed Mr Jamieson references and other contracts he was
engaged upon.
[47] Dr Aoudi
said that the invoice which he presented to the defenders in 2004 was based on
the revised quotation which he had "designed" for the pursuers. He claimed he was entitled to anything paid
by the UAE Military in 2003 above the defenders' base selling price at that
time. He did not, however, appear to
know what the base selling price for the equipment was in 2003. He was unable, or unwilling to answer the
question as to why, in presenting his invoice, he did not seek to apply the
terms of his 1998 Agreement to the 2003 prices.
When it was pointed out to him that what he was claiming appeared to
amount to 44% of the base price of the equipment sold, he said that that was
what he was entitled to because that was what had been agreed between the
parties. He also concluded that the
Agreement between the parties dated 31 March and 5 April 2000 (7/1 of process) had now come
into full force and effect. He indicated
that if he did not succeed in the present action he may consider raising other
litigation against the defenders.
[48] In
re-examination Dr Aoudi claimed that he had known persons in the SOC prior
to dealing with the defenders. He also
said Mr Al Akra of Al Badia always acted under his instructions. He had, he said, engaged the services of Neibal
because Al Badia had proved they could not do any more than he himself
could do. Neibal were chosen because the
defenders "wanted the order quickly - to facilitate receiving the order in
their hands". IGG was not established as
a company, he said, until 2002-2003.
They simply took the order and discussed the terms of payment. Dr Aoudi accepted that his contacts with
the defenders ended in 2002 but he said "the order was there by then". IGG, he said, acted as an intermediate buyer
in the transaction whereby the equipment of the defenders was eventually bought
by the SOC. The pursuers, he said, under
the arrangements he had made with the defenders would never have been an
intermediate buyer. They were to be and
remain agents. The pursuers are what he
described as a "normal company" which could not import goods and sell them
having no licence to do so. That was to
be contrasted with the position of IGG.
[49] Dr Aoudi
said that at the meeting with Scott Jamieson, held on 2 June 1998, the previous contracts he had
negotiated, which he showed to Mr Jamieson, evidenced that there was a 40
or 60% uplift in the price of the goods to represent commission to the pursuers. He had never agreed anything less than 40%
commission.
[50] Mr Al
Akra gave evidence at the proof. He
had travelled from the Sudan
to do so. He was clearly very ill and
very frail. The Court was advised that
he needed dialysis treatment which could not be provided for him in Edinburgh. He was interposed as a witness before
Dr Aoudi had completed his evidence.
[51] This
witness informed the Court that his company Al Badia co-operated with
Dr Aoudi's company from time to time.
Dr Aoudi had, in 1998, drawn his attention to publicity regarding
the defenders' Stealth equipment.
Dr Aoudi contacted the defenders in his presence and a fax came
from the defenders' Mr Scott Jamieson within 20 minutes. The witness claimed that he was present at
the meeting with Dr Aoudi and Mr Jamieson in the lobby of the Novotel
Hotel. Mr Al Akra said that there was a discussion
about prices and commission and that Scott Jamieson had said "You can add
whatever your want" in addition to 10%.
Dr Aoudi had said he wanted to add 30%. The witness confirmed that he subsequently
took Mr Jamieson to a meeting at the SOC in order that a presentation
should be made. The people from the SOC
at that meeting had been impressed by the stealth rebreathers. They wanted to have a live presentation to
see the actual equipment being used. A
subsequent demonstration was arranged which he attended. Dr Aoudi had paid money to get the
equipment cleared through customs. The
demonstration took place out at sea. SOC
representatives liked what they saw at that demonstration and said they would
discuss possibly acquiring the rebreathers and giving an order for 24 of
them. They wanted to place an
order. The defenders had already quoted
prices which included added commission and had sent these to the SOC.
[52] Mr Al Akra
said that this was the beginning of the process. The process took time. The proposal to buy had to go to various
committees - a technical committee and a finance committee. This process could take 2-5 years. Sometimes a project could take 10 years to
finance. The technical committee would
go and visit the supplying company to check on their reliability. Mr Al Akra said he kept in contact
with the SOC. They kept on saying that
they liked the product but needed further meetings and discussions. The witness said that when the defenders gave
his company a contract to work for them he did not like this because, if he and
Dr Aoudi were not working together, this would delay things. He claimed, therefore, that he gave the Agreement
back for this reason. He said he told
Dr Aoudi to continue with the job and he himself had no involvement with
promoting the defenders' products thereafter.
I did not accept the witness's evidence in this respect. It was clear to me that, as will be seen, it
was the defenders who terminated the relationship with Al Badia because of
the failure by Al Badia to progress matters.
[53] Mr Al Akra
subsequently had heard that a company with whom a Colonel, who the witness
described "Fadel" was involved, and who had been purchasing officer in the SOC,
had purchased equipment from the defenders for the SOC.
[54] In
cross-examination Mr Al Akra sought to distance himself from the content of 7/4
of process and attempted to explain away some of the things said therein. He accepted that between March 1999 and 2000
he was in disagreement with Dr Aoudi and had fallen out with him. The defenders, he said, had known about this
falling out. He eventually accepted that
he had been trying to take business away from the pursuers. A Commanding Officer of the SOC, he said, did
not like the fact that two companies seemed to be acting for the
defenders. Under reference to 6/50 of
process and the provisions therein regarding commission the witness said that
he thought he would get payment of an uplift on the price of the equipment but
that this was to be provided for in another letter. I did not believe the witness in respect of
this matter. This was not put to any of
the defenders' witnesses and no such other letter was produced. The witness said that by 9 December 2000 Dr Aoudi was using Neibal
to support him to win the order since there was no confirmed order at that
stage. Before that, both the pursuers
and Mr Al Akra's company had been trying to obtain the confirmed
order. Had there been a confirmed order
during the currency of the defenders' agreement with Mr Al Akra's company
then, he claimed, his company would have got some commission and the pursuers
would have got some also. The witness
said that his company had dealt a great deal in the past with the SOC before
acting in relation to the defenders' products.
The previous contracts could take a long time to emerge from the SOC. He accepted, however, that nine months might
be the normal period but then went on to say the usual period was five
years. Matters of finance were the cause
of delay. SOC, he said, always visited
the supplier's premises.
[55] Mr Al Akra
agreed that there was no confirmed order until there was a signed
contract. He, nevertheless, considered
that the defenders had got the contract for the stealth rebreathers. Dr Aoudi had told him about IGG placing
the order with the defenders.
[56] In
cross-examination the witness was asked about the initial meeting between
Dr Aoudi and Mr Jamieson. He
claimed that he was present at the meeting in the Novotel Hotel together with
another friend of Dr Aoudi. In
contrast to Dr Aoudi's evidence that the meeting lasted for three hours Mr
Al Akra said that it lasted for half an hour. Scott Jamieson had agreed at that meeting
that Dr Aoudi would represent the defenders and he would be paid 10%
commission together with any uplift he wanted.
The witness also maintained that Scott Jamieson gave the prices of the
equipment to Dr Aoudi at the meeting in the Novotel Hotel lobby.
[57] In
re-examination Mr Al Akra accepted that there was no confirmed order
obtained from the SOC during the whole time he was involved in acting either on
behalf of his own company or on behalf of the pursuers.
[58] The next
witness heard at the proof was led on behalf of the defenders and was
interposed before the close of the pursuers' proof. The witness was Major Ahmed Ashehi. This witness is presently a serving officer
in the Armed Forces of UAE. He has been
in the armed forces for 19 years.
Between 2002 and 2003 he was in charge of the diving unit of the SOC. Prior to 2002 he also served within the
diving operations unit. In total he had served
within the SOC for 18 years. In the
period between 1998 to 2003 the witness explained the Commander of the SOC was
Brigadier Bawardi, Colonel Suhail's Deputy Assistant, No 3 in the chain of
command. Major Ashehi explained that any
business interests which the officers may have while serving in the Forces
required to be discussed with GHQ. After
retirement, however, officers were free to work with any commercial
company. The Major explained to the
Court the procedures followed by the SOC when they were intending to purchase
equipment from a manufacturer. In the
first place they would carry out checks on the company in question and, in
particular, they would enquire as to whether the company had a local agent who
had good credit and who was well known to GHQ.
If satisfied that there was a local agent in place who met the foregoing
criteria, the manufacturer would then be invited to provide a demonstration of
the equipment in operation. If the
technical staff of SOC liked the equipment, in the light of the demonstration,
reports would be sent to Headquarters recommending the purchase of the
equipment. It did not necessarily mean,
that at that stage, a contract was certain to be forthcoming. It was the Commander or Deputy Commander, who
saw the reports, who would make final checks about the company and its
agent. The Major emphasised that the SOC's
requirement that there should be an appropriate agent in place arose from the
need to ensure that there will be no problem with after sales service. Only if the Commanding Officer was satisfied
with the status of the company and its agent, would a report go to GHQ
recommending the purchase of the equipment.
One of the chiefs of staff would consider that recommendation and if he
thought it appropriate he would pass it on to the purchasing committee. The purchasing committee would then finalise
the order by issuing a purchase order.
On occasions, particularly if the product in question was a novel one,
members of the SOC would visit the manufacturer in their premises prior to the
issuing of the purchase order. The whole
procedure, the Major said, would normally take about a year from beginning to
end. After the technical committee had
recommended a purchase, the matter would never take 2-5 years. The reason for that was that the technology
of military equipment was changing quickly.
Once a recommendation to purchase was made, the Military generally
required the equipment to be obtained quickly.
Something would have gone wrong if a transaction took 2-5 years to
complete. The Major said that the first
contact he had with the defenders was when Colonel Khalifa called him to come
and see him. He wanted the Major to meet
someone from the defenders. The Major
had heard of the defenders before because they had fixed certain plant at the
diving unit. Colonel Khalifa's request
to the Major to meet someone from the defenders occurred in late 2002. A meeting was arranged, in late 2002, between
the Major and Mr Godsman of the defenders.
Mr Godsman showed the Major a variety of equipment from the
defenders' catalogue. The major said
that he and his colleagues were interested in all of the defenders' equipment
because they were about to establish a new diving centre. The Major was particularly interested in the
Stealth Rebreather equipment. At this
stage he only saw it in the defenders' catalogue. The Major said that he told Mr Godsman
that he would require a technical demonstration of the equipment before
considering purchasing it.
Mr Godsman refused to provide a demonstration which the Major found
surprising. Mr Godsman explained
however that the defenders had carried out previous presentations and
demonstrations over a period of time with as he put it "no luck". The Major, however, persuaded Mr Godsman that
he and his colleagues were really interested in the equipment.
[59] The Major
and his team then visited the defenders' premises in Aberdeen
to see the equipment and to satisfy themselves generally about the
defenders. The witness said that no
decision had been reached in the SOC, before that time, or before he took up
his position with the diving unit, to purchase the Rebreather equipment from
the defenders. After he went to the
defenders' premises in Aberdeen,
the Major wrote a favourable report to his Commander and enquired as to why
there had been no order placed with the defenders previously. The Brigadier had replied that it was
impossible to deal with the defenders because it was not clear who their agents
were to be. The Major informed the
Brigadier that he considered the defenders' products were good and that the
defenders themselves were a good company.
The Major's recommendation, it has to be noted, at that stage, was
apparently to deal with the defenders in respect of rescue equipment and
training courses. The Brigadier, the
witness said, approved his recommendation regarding the purchase of rescue
equipment and training courses but not the purchase of stealth rebreathers. That, it was explained, was because the unit
already had a quantity of rebreathers.
By the time the Major and his team went to Aberdeen
he understood that the defenders now had an agent who were IGG. The rebreathers which the SOC had in their
stores might have served their purposes if they could be modified. SOC contacted the original suppliers of the
rebreathers they had in stock to see if this modification could be carried
out. The witness's evidence was that
before his visit to the defenders' premises in Aberdeen,
the SOC had not wished to purchase the defenders' rebreathers for two
reasons. The first was that they were
not comfortable with the use of computer equipment in association with the
defenders' rebreather and secondly, there was, in place, no appropriate
agent. The Brigadier informed the Major
that it had not been possible to deal with the defenders previously because
there was no agent in place with whom the SOC could deal. There was no such problem with IGG. The Major himself remembered that the second
in command in that company had previously worked in the SOC.
[60] In
emphasising the importance of the SOC having a local agent to deal with, whom
they could trust, the witness said that they were not looking for a "suitcase
agent" but for a big company. It was
important not to engage with an agent who appeared one day and disappeared the
next. His discussions with the Brigadier
led him to believe that the pursuers had been seen as falling into the category
of agents last described. In all of his
experience the Major said the SOC had never dealt directly with a
supplier. At the material time when the Major
went to the defenders' premises in Aberdeen
he was interested in acquiring non-magnetic breather equipment. He went to Germany
to inspect a rebreather produced by a competitor of the defenders but that was a
magnetic type of equipment. The Major
also went to Germany
to see the defenders' non-magnetic rebreather which had been supplied to German
Military Forces. This inspection had
removed any concerns about the incorporation of the computer device in the
defenders' product. By this time the
Major had discovered that any adaptation of the rebreather sets already owned
by the SOC by the original American supplier would be too expensive. The way, therefore, was set, at that stage,
for an order to be placed for the defenders' stealth non-magnetic rebreathers
together with certain other equipment and training courses. The purchase was to be made from IGG.
[61] The witness
said that he had never dealt with the pursuers and had only recently heard of
them in connection with the present proceedings. He had never dealt with the Al Badia
company though he knew of that company.
He had never dealt with Neibal and did not know of them. It was the Major's clear evidence that none
of those companies played any part in the decision to purchase equipment and
training courses from the defenders in 2003.
IGG was a well-known big company.
The involvement of Fadhel Al-Kaabi, formerly an officer in the SOC, in
that company, was not decisive in the contract being placed with IGG. Mr Al-Kaabi did inform the Major that if
there was any problem experienced with the equipment purchased from the
defenders, the chairman of IGG Limited himself
would deal with it. The procedure was
that IGG recommended the defenders and that made the SOC comfortable regarding
after sales service. It was this
witness's evidence that there never had been a definite decision to purchase
the defenders' stealth rebreather equipment before 2003. Any recommendation, if there was such, made
in 1998 to purchase the defenders' rebreathers did not result in any decision
to buy until 2003. There never was any
letter of intent from the Brigadier to purchase the defenders' equipment during
2000 and 2001. Even if the pursuers had
remained working on the project for 2000 years, they would never have got a
contract from the SOC, he said, because they did not provide the security to the
SOC in relation to any problems that might be experienced with the
equipment. The Major thought that there
may be differences between the equipment that the defenders were offering to
supply in 2001 and what was offered for supply in 2003 although he was unsure
about that.
[62] In
cross-examination under reference to 6/59 of process the Major accepted that
there may have been some interest expressed by the SOC in 2001 regarding the
defenders' rebreathers but he himself had been unaware of any such interest at
that time. Whatever interest there had
been, however, ran into the problem that the technical people in SOC who
reported on the stealth rebreather were uncomfortable with it because of it
having incorporated a computerised system.
The concern was that the computerised system would not operate in saline
conditions. The technical assessment
committee had reached the conclusion that they could not recommend the
acquisition of the defenders' rebreather because of this. In due course, however, the defenders
convinced the Major and his team that the perceived problem did not exist with
their equipment and they did so, in particular, by the demonstration of the use
of their equipment in Germany
which the Major and his team attended.
The Major, in cross-examination, said it was his recommendation that
resulted in SOC going forward with the defenders as their principal supplier
for diving equipment. They were still
working with the defenders. The way in which
the Military invariably purchased equipment would be that the purchasing
department would send a purchasing request to the supplier's local agent and
the contract was concluded between the Military and the agent. He repeated that the process, from initial
interest in the equipment, to its final purchase, would normally take no more
than a year.
[63] The last
witness led for the pursuers was Ghassan Al Masri. He informed the Court that he was engaged
business development. He had worked for
the pursuers for three years. In 1998,
however, he was not working for the pursuers.
He was working for the Bin Khaled Group, which is owned by the Emirates
Royal Family. Nevertheless the witness
said he got involved in 1998 with Dr Aoudi and his dealings with the
defenders. At that time he said he was
giving advice to a number of companies including the pursuers. Dr Aoudi had asked him to join him at a
meeting after he had heard about the defenders' stealth rebreathers in a
newspaper article. The witness said that
he attended a meeting which he said took place on 2 June 1998 in the lobby of the Novotel Hotel, Abu
Dhabi. He was,
he said, there to give Dr Aoudi support and advice regarding this
project. The meeting took place with
Scott Jamieson of the defenders. The
witness said that the pursuers and Dr Aoudi already have many contacts
with the Military and that he considered that Dr Aoudi would be in a
position to persuade the right people to buy the defenders' product. Mr Al Masri said that Mr Al Akra
arrived just as he, Mr Al Masri, was leaving the meeting. The witness said that he had listened to what
was being discussed. Dr Aoudi had
said that he was interested in the defenders' product. He put certain questions to Scott Jamieson
regarding the technology. Scott Jamieson
had wanted Dr Aoudi to contact the SOC immediately to start
marketing. Dr Aoudi had said that
he had many contacts in the SOC. The
price of the product was mentioned at the meeting. A figure of £20,000 for each unit was
referred to. There was discussion about
payment to the pursuers. Dr Aoudi
asked Scott Jamieson how much the defenders normally paid their agents. Scott Jamieson had replied 10% on base
price. Dr Aoudi had said that
because of the time involved seeking to have an order placed 10% would not be
enough. A figure of 30% was discussed. This was in the nature of a preliminary
discussion. The detail was to be worked
out afterwards. The witness said that
the meeting lasted two hours, although as has been noted, he apparently left it
before it was completed since he said that he was leaving as Mr Al Akra was
arriving. The witness said that he did
not attend any other meeting which was attended by Scott Jamieson. After the meeting Dr Aoudi had kept him
informed about progress. The witness had
become an employee of the pursuers in August 2003. Before that, he had, in 1998 commented on the
draft agreement in favour of the pursuers sent by the defenders and gave
Dr Aoudi some advice upon it. Mr
Al Masri said he told Dr Aoudi that he should have had a concluded
contract with the defenders before beginning to act for them. He had replied that he was confident in his
dealings with the defenders. The witness
claimed that what was set out in 6/22 of process was consistent with what was
discussed between Dr Aoudi and Mr Jamieson at the Novotel Hotel
meeting. Mr Al Masri said that he
had helped the pursuers' staff make the arrangements for the initial
demonstration of the defenders' product.
After the demonstration Dr Aoudi, or his staff, told the witness
that the SOC were very happy with the defenders' product. The witness was at pains to say that the
pursuers did everything that was required to produce an order with
Al Badia assisting them. In
particular Dr Aoudi contacted the SOC, got information regarding existing
suppliers, arranged meetings and the demonstrations. All of this took time to process.
[64] In
cross-examination the witness said that though he had to leave the meeting at
the hotel before it ended, he was satisfied that a concluded agreement had been
made between Dr Aoudi and Scott Jamieson.
The defenders' witness, Scott Jamieson, was brought into court. Mr Al Masri said that this was the same
man that he saw at the meeting in the hotel but that he had been larger then
and his hair was, now, perhaps a bit thinner.
[65] In
re-examination, the witness repeated that no final agreement had been reached
at the meeting in the hotel regarding the level of commission. He then said he was not 100% sure if the
person brought into court was the same person as he saw at the hotel. He was similar to that person but he was not
sure it was the same person.
[66] The
defenders led Scott Jamieson. He
is presently employed by the defenders, as area director, for the Middle
East. He had been employed
by the defenders for 15 years then left them in 2000. He returned to employment with them in 2004.
[67] The witness
explained that the stealth rebreather product was being continuously developed
over the period to which the present proceedings relate. The non-magnetic version was not introduced
until 2000-2001. The advantage of this
development was that certain mines have "signatures" which will be exposed if
they detect equipment with magnetic signals.
The defenders' only other competitors for such equipment are Dragor, a
German company and Carlton, an
American company. In 1998 the witness's
immediate superior within the defenders was David Smith. Mr Smith phoned him while he was in Abu
Dhabi. Mr
Jamieson was returning from a sales trip which had started in India. Mr Smith told Mr Jamieson that
Dr Aoudi had contacted him and had expressed an interest in the defenders'
products. Mr Jamieson was staying
at the Novotel Hotel. Dr Aoudi called
the witness on his mobile telephone.
They decided to meet that evening, 2 June in the Novotel Hotel. Mr Jamieson said that he had had a lot
of experience in the Middle East of persons seeking to
act as agents for the defenders. It was
common for the defenders to be approached by persons who would say that they
might be able to effect transactions on their behalf. It was always essential to review any such
potential agent. That meant meeting them
face to face, visiting their premises and generally investigating what it was
they could or could not do.
Mr Jamieson had no recollection of anyone other than Dr Aoudi
being at the meeting at the Novotel Hotel.
He said that he did meet Mr Al Akra but that was on the next
day. He had never seen Mr Al Masri
before he had been brought into court that day.
[68] A second
meeting took place between Mr Jamieson and Dr Aoudi on 3 June at
the pursuers' offices. At the first
meeting Dr Aoudi showed Mr Jamieson the article about the defenders'
product which had appeared in the British Sunday Times. Mr Jamieson was impressed that
Dr Aoudi had taken the initiative to follow that up. They had a general discussion about what the
pursuers' company did and what products they dealt in. The witness informed Dr Aoudi a bit more
about the stealth rebreather.
Dr Aoudi was, he said, very non-technical. Mr Jamieson showed the defenders' sales
brochure to Dr Aoudi. The meeting
lasted about one hour. Dr Aoudi said
that he would be able to take the defenders' equipment and "get it into the
Special Forces". He offered also that
the pursuers should act more generally as the defenders' agents. Mr Jamieson informed the Court that the
only agreement arrived at at the hotel was that Dr Aoudi and himself
should meet the next day. No contract
was concluded. The witness emphasised
that he would have never agreed to have Dr Aoudi or the pursuers acting as
the defenders' agents at such a meeting, held in a hotel lobby, which lasted
for one hour. It was necessary for the
defenders to be sure about the people they acted through. The defenders prided themselves in the
quality of their products and services.
Mr Jamieson said that he could not have concluded an agreement on 2 June. He needed to discuss the matter with
Mr David Smith and fellow directors in the company. He would not have agreed any figure in
relation to commission nor any "uplift" payment. The witness said that, as at the first
meeting on 2 June, Dr Aoudi did not inform him of the procedure that
would be required to be followed before an order might be placed by the SOC. As to timescale, however, Dr Aoudi said
that he had been told that this equipment was needed very very urgently and
that he could get a deal in a short space of time. A deal would be obtained within six
months. No mention was made of 2-5
years. Dr Aoudi said the deal would
be concluded very very quickly.
[69] At the
meeting the following day, 3 June, at the pursuers' offices, there were
further discussions about the defenders and their products. The witness said that, in turn, he himself
asked a lot of questions about the pursuers.
Dr Aoudi said that he did a lot of business with the SOC. His company provided portable hospital tents,
food supplies, uniforms and memorabilia.
Dr Aoudi claimed that he worked both for the SOC and the Armed
Forces generally. Dr Aoudi said
that he was being pressed to get the defenders to act through him. Mr Jamieson said that he did recall
Dr Aoudi asking him about how much the commission was likely to be. He asked what the base or list price of the product
was and was informed it was, at that time, between £20,000 and £22,000. Dr Aoudi asked what was included in that
"for the distributor". Mr Jamieson
said that he said that would be 10%. He
could not recall any question of any further "uplift" being payable to the
pursuers, being raised. He accepted,
however, that he was aware of an approach adopted in certain parts of the world
by agents, or distributors, which involved them seeking an uplift above the
standard 10%. That would depend on the
particular case and would be for expenses incurred by the agent or distributor e.g.
for provision of accommodation, transportation, customs clearance and the
like. It was not intended to represent
additional income as such.
Mr Jamieson was adamant that at the end of the meeting on
2 June there was no concluded agreement between the parties. He still required to discuss matters with his
boss and the other directors of the defenders on his return to Aberdeen. Mr Jamieson said that before he had met
Dr Aoudi he himself had heard that the SOC did need to upgrade their
existing rebreather equipment. The
defenders had, in fact, already sold to the SOC a gas remixing system. The sale had been effected by a sale by the
defenders to another company in Abu Dhabi
who, in turn, sold it on to the SOC. The
other company were, in fact, the agents for Carlton,
the defenders' American competitors. The
defenders would not use the other company for the sale of stealth rebreathers
because they were acting for Carlton,
who were the defenders' direct competitors for rebreather-type equipment. Mr Jamieson said that had it not been
for the approach of Dr Aoudi, the defenders would, in his view, in any
event, have made an approach through the United Kingdom Government to the SOC at
a forthcoming military equipment exhibition to offer to sell rebreathers.
[70] Although
initially he denied this, the witness accepted that the pursuers were, in due
course, appointed as the defenders' agents for the sale of rebreathers to the
Abu Dhabi Military and the Ministry of the Interior. As has been seen, in 6/5 of process, he
himself wrote to Dr Aoudi with prices of the equipment and said "above
prices are inclusive of a 10% commission".
By 6/6 of process, the witness accepted the pursuers were appointed as
agent for a period of six months from 30
June 1998. Mr Jamieson
said that that period was chosen because it accorded with the time which
Dr Aoudi said it would take to get an order. He denied that, apart from the reference to
10%, he had agreed that the pursuers could add to the price any figure they
wished as an additional payment to themselves.
As agent, a body like the pursuers, was normally entitled to 10% of
commission and to earn that commission they had "to close a sale". Effecting an introduction was not sufficient to justify the
payment of commission. Mr Jamieson said
that Dr Aoudi said he was very confident that he had all the contacts
required to close a sale.
[71] Mr
Jamieson recalled making a presentation to the SOC in October 1998. The purpose of this was to try to get closer
to the potential end user. Mr Al Akra
had accompanied him to that presentation.
Mr Jamieson considered that, at that stage, it was seen to be necessary
for a sale to be made through an agent.
Mr Jamieson said that after the first presentation, whenever he
went to Abu Dhabi to meet with the SOC,
Mr Al Akra generally accompanied him.
Dr Aoudi never attended.
Mr Jamieson formed the view that Dr Aoudi had very little, if
any influence, with the SOC. In discussing
with the SOC's personnel he would drop the pursuers' name into the conversation
and the representatives of the SOC, by their reaction, indicated that they did
not know who they were. Mr Jamieson said
that he would meet Dr Aoudi when he arrived in Abu Dhabi and he did so at the
pursuers' office. Dr Aoudi always
appeared to be very busy with other things and to be constantly on the
telephone. Mr Jamieson stayed on
two or three occasions in a flat close to Dr Aoudi's office which was
owned or rented by Dr Aoudi.
[72] Mr
Jamieson described what occurred at the demonstration on 7 November 1998. No one from the pursuers or Al Badia attended
the demonstration but Mr Al Akra accompanied himself and his
colleague Paul Haynes to the facility where the demonstration was to take
place. Mr Jamieson said the
demonstration was an apparent success.
The equipment worked fairly well.
SOCs personnel would require training in its use. The equipment demonstrated on this occasion
was a low magnetic set. After the
demonstration, Dr Aoudi called Mr Jamieson. He said he was very confident that an order
would materialise in a very short space of time. He was pushing to be agent of the defenders
in respect of the whole of the Arab Emirates and neighbouring countries. He wanted to have such an agreement right
away but the defenders said they needed to get the order from SOC for the
stealth rebreathers, the requirement being understood to be 24, before they
would consider any further agreement with the pursuers. The pre-condition that an order for the 24
stealth rebreathers had to be placed, before any extended agreement with the
pursuers came into place, was reflected in clause 3 in the draft agreement
attached to 6/21 of process and 6/22 of process. Mr Jamieson said that he recalled having
discussions with Mr Smith at the time of 6/21 of process about an uplift
payment. Under reference to 6/22 of
process, this witness said that his understanding of the expression 5% gross
negotiation fee, referred to in that document, was a reference to a possible
discount to the client. That he said was
a reasonably common feature in such transactions. The reference to 10% gross expenses was he
thought a reference to costs which the pursuers might incur in relation to
travel etc. The "15% other expenses" he
could not explain. Moreover he could not
explain how the calculations outlined in the document were arrived at. His overall impression was that any uplift
would represent costs actually incurred on a case by case basis. He added, however, that the letter addressed
to the SOC of 7 December, attached to 6/22 of process, included quotations
of prices which apparently referred to uplift figures contained in 6/22.
[73] From
December 1998 until February 1999 the witness said that he was making phone
calls to Dr Aoudi to have the order pushed along. As regards the demonstration that took place
at the end of March 1999 this was for the purpose of seeing the equipment
operated in deep waters. The set
performed well on that occasion. On
receipt of Dr Aoudi's letter 6/39 of process it was Mr Jamieson's
understanding that the order was to come within 2 weeks. Mr Jamieson wrote to Dr Aoudi on 23 May 1999 to tell him that an order for the stealth equipment
was to be placed by a German client.
This was to get Dr Aoudi to move matters on because the German
order was a big one. Dr Aoudi's letter
of 11 May 1999 led Mr Jamieson to believe that the SOC order
was being finalised. Given the delays
however, so far, Mr Jamieson was becoming sceptical. Even when Dr Aoudi wrote on 26 July
1999 (6/43 of process) saying that there was a confirmed order,
Mr Jamieson was a bit doubtful. Dr
Aoudi, the witness said, never suggested that he was wrong in saying that there
was an order available at 26 July 1999. From that time onwards there was apparently
no written correspondence between the defenders and the pursuers apart from
Dr Aoudi's letter of 7 October 1999 (6/45 of process) which
Mr Jamieson thought a bit strange having regard to the quantity of
equipment being inquired about. The
witness said that from July 1999 until early 2000 there would have been
telephone contact between himself and Dr Aoudi who was always saying that there
is an order just waiting to be signed.
The witness as previously noted left the defenders in September/October
2000. No order had materialised by that
time. Dr Aoudi simply kept on
saying "it has been agreed".
Dr Aoudi continued to phone Mr Jamieson after he had left the
defenders telling him that the order was agreed.
[74] In
cross examination, Mr Jamieson said that, with the benefit of hindsight, he
considered that the pursuers did not know the local market for the equipment
the defenders produced. Under reference
to 6/85 of process, the initial invoice of the defenders for the equipment in
the event purchased in 2003, Mr Jamieson said that the equipment sold under
that invoice was considerably different from that being made the subject of
quotations in 1999 and 2000. He remained
adamant that at the meeting at the Novotel Hotel no concluded agreement was
reached about anything and, in particular, about any rate of commission. He was convinced only two persons, himself
and Dr Aoudi attended that meeting.
At the second meeting he would have told Dr Aoudi that 10% was the
normal rate of commission. It was
possible that, at that meeting, the question of an "uplift" might have been
raised by Dr Aoudi. Mr Jamieson
said that after the second demonstration, the representatives of the SOC seemed
interested in ordering the product and he would have expected an order in due
course arising from this. They
definitely had a requirement for the equipment and it performed well. Quite apart from Dr Aoudi's reassurances
the witness said that he was expecting that there would be an order.
[75] In
re-examination the witness said an uplift of approximately of £500,000 on the
order which was in the event placed for the equipment was, in his experience,
"potentially a crazy number".
[76] The
final witness was the Joint Managing Director of the defenders, Douglas Godsman. This witness has considerable experience of
working in the Middle East since about 1979.
He joined the defenders in 1997.
He explained that the original version of the stealth rebreather was
purchased by the United Kingdom Royal Navy.
That version was specifically not suitable for use in mine clearing
operations. He described the evolution
of the equipment from its original form to low magnetic form (described as EODCM)
which was suitable for some forms of mine detection. That version of the equipment came onto the
market in late 2000. It was then further
developed to a non-magnetic type which could be used in the detection of most
mines. That development in the equipment
took place in 2002. It was the last version,
the non-magnetic version of the equipment, which was supplied to the Special Forces
of UAE. Mr Godsman said that the
defenders claimed to be world leaders in diving technology. Their only rivals for specialised diving
rebreathers were Dragor in Germany, Carlton in USA and a French company known
as Inter Spiral. The defenders deal with
a number of Ministries of Defence including that of the United Kingdom, France, Italy, Germany, India and Australia.
[77] The
witness explained that as regards trading in the Middle East, the defenders would be
approached by many companies who would seek to persuade them to employ them as
agents. In Bahrain it was a requirement of the
law that a foreign manufacturer should have an agent. In the UAE, while there was no specific legal
requirement, this was the practice when dealing with military. The defenders had dealt with commercial end
users in the UAE without employing an agent.
If the defenders sold directly to companies or individuals who sold on
their products to a third party then the defenders would regard such companies
or individuals as its representative or distributor. If an individual or company acted as a
distributor of the defenders' goods, the defenders would normally give them a
discount from their list price. In some
cases the distributor might also add a margin to the list price but that would
be done only in consultation with the defenders. Mr Godsman explained that when the
defenders dealt initially with IGG he understood that IGG would act as agents
and be paid commission by the defenders.
In the event, however, IGG purchased the goods from the defenders and
then sold them on to the SOC. They would
sell on at a profit by adding to the list price. Mr Godsman said that, in his experience, he
had only known of one occasion when an agent asked for an uplift on the
price of the goods to be paid to him.
The agreed commission should normally cover all payments to be made to
the agent. Mr Godsman emphasised that any
such "uplift" would require to be discussed with the defenders and explained to
them. They would require to know what
any such payment was in respect of.
Sometimes such payments were sought in respect of payments to third
parties who might facilitate the contract.
They might be paid in respect of unforeseen costs, or unusual costs, not
normally covered by commission. There
was sometimes something also called a "negotiation fee" which provided for a
deduction from the price to induce the purchase. These payments would not represent additional
income to agents. They were
extraordinary payments and the defenders would need to know where they were
going. Mr Godsman claimed that he was
totally against the practice, in any event, because in the first place he
always wanted to be in control of the price.
Not to be could cause potential damage to the defenders'
reputation. Secondly, they gave the
appearance of payments that were made to influence matters and that left a
nasty taste in a company like the defenders.
Mr Godsman said he had only experience of two examples, when
working with the defenders, when uplifts were paid and he had experience of one
example of such a thing when he was working for another company. It was something however which agents asked
for on countless occasions.
[78] The
witness confirmed that the defenders had contracted with the SOC, prior to the
involvement of the pursuers. That was in
relation to supplying a gas mixing system.
This was in 1997. The defenders
had sold the equipment to a company based in Abu Dhabi who sold it onto SOC. The defenders installed the system.
[79] Mr
Godsman said that he only became involved in the matters, to which the present
proceedings relate, sometime after those matters had been initiated. Mr Smith and Mr Jamieson had, in
general terms, told him that they were hopeful of obtaining an order for the
stealth rebreathers from the SOC and that the pursuers were being considered as
a possible representative of the defenders in parts of the Middle East but
that any such appointment would depend on them securing an order from the SOC
for the defenders' stealth rebreathers.
Mr Godsman was aware that a demonstration of the defenders'
equipment had taken place in 1998 and that the equipment was well received by
representatives of the SOC. The witness
explained that demonstrations were expensive to arrange. They may take up many days of senior
management time. He was always keen,
therefore, to ensure that there was a real requirement on the part of the
potential purchaser for the equipment in question before agreeing to carry out
such a demonstration. Military bodies
were always keen to have demonstrations.
They kept them busy in peace time.
Accordingly, in advance of authorising the second demonstration to the SOC,
Mr Godsman specifically sought a letter of intent from the potential end
user. The letter of intent was never
forthcoming. Under reference to 6/20 of
process, Mr Godsman said that he did not see that document at the time that it
was written. The format of the attached
agreement had come from Mr Godsman.
He was the draftsman of it. Had
the witness seen 6/22 of process he would have asked for figures contained
therein to be accurately calculated and verified. It was pure speculation as to what the "10%
expenses" referred to. The same could be
said of 15% "other". Even if these sums
had been for legitimate purposes, for example, in respect of payments to third
parties like Al Badia, Mr Godsman would have expected an explanation and
justification to be given. The defenders
would normally prefer to make any such payments, if otherwise legitimate,
directly by themselves to the third parties involved. Mr Godsman quite frankly and candidly,
however, said that he wanted to make it clear to the Court that at the time Mr
Smith wrote what is set out in 6/22 of process, the defenders had just
completed a merger with another company.
Two different commercial cultures were, as a result, brought into
conflict. There was pressure on the
sales manager, Mr Smith, to increase sales because the defenders' costs at that
time were rising. That kind of pressure,
Mr Godsman said, might be an explanation for Mr Smith writing on the lines he
did in 6/20. It did not reflect the
company's standard policy. It was to be
contrasted with what was provided for in the draft agreement attached to it
regarding commission.
[80] Within
the defenders, by the time of the second demonstration, the pursuers' assurance
that an order was available was being treated as a joke. Had SOC really felt they needed the equipment
and wanted to acquire it then they could have fast tracked the order. No such order was forthcoming and there was
an erosion of confidence within the defenders that such an order would be forthcoming. The witness said that he could not understand
why Mr Smith had given the pursuers the contract, 7/11 of process, given that
erosion of confidence in the pursuers being able to obtain an order. It was a commercially unwise decision of Mr
Smith, who shortly thereafter left the defenders, to give such a contract to
the pursuers.
[81] The
witness had himself really become directly involved at the time when
Al Badia was appointed by the defenders to act for them. The background to his becoming so involved
was that Mr David Smith had told him that he was "a bit distraught" that his
dealings with the pursuers were bearing no fruit and there were periods of time
when there was no communication from the pursuers. Al Badia had recently written its letter
to the defenders 7/2 of process. Mr Godsman
understood the reference to "other companies" in that letter, was a reference
to the pursuers. Mr Godsman saw the
letter and it sparked his interest since it was suggesting a meeting with the
apparent decision maker in the SOC, Brigadier Bawardi. The fax of 27 September
2000,
7/3 of process, from Mr Smith to Al Badia was written with the witness's
knowledge and expressed his views on the subject. What was said in Al Badia's reply of 30 September 2000, 7/4 of process, the witness said, coincided with
what Scott Jamieson had told him of the respective roles of the pursuers
and Al Badia. Mr Godsman was
almost certain that both he and Mr David Smith had drafted, together, the
content of 7/5 in which the defenders were seeking clarification of the various
points set out therein from Al Badia.
On receipt of Al Badia's reply 7/6 of process, which set out Al
Badia's assurances that success in obtaining an order would follow, Mr Godsman
decided to go to Abu Dhabi on 10 and 11 October 2000. He was
accompanied by Paul Haynes of the defenders.
He was met at his hotel by Mr Al Akra. He tried to phone Dr Aoudi but without
success. Mr Al Akra had said
that there had been a dispute between himself and Dr Aoudi regarding an
investment opportunity in Saudi Arabia. Mr Godsman discussed with
Mr Al Akra the possibility of the defenders entering into an
agreement with Al Badia to have them act on their behalf in relation to
securing an order for the stealth rebreathers.
On his return to Scotland Mr Godsman sent a letter
to Al Badia 6/50 of process setting out the terms of such an agreement
which I have set out above.
[82] Mr
Godsman met Major General Khalifa, who was introduced as the owner of
Al Badia. He claimed to be a
personal friend of the Brigadier who could bring about an order. There was, however, no outcome from Mr
Godsman's meeting with the Brigadier.
Contrary to what he had been led to believe by both the pursuers and
latterly by Al Badia, there was no order waiting to be uplifted. The Brigadier, indeed, appeared to express
some surprise as to why Mr Godsman and Mr Haynes were there. He said "Oh you are from Divex. Have you anything new?". Mr Godsman said that he was there to
demonstrate equipment that had already been demonstrated and for which, he
understood, SOC wished to place an order.
The Brigadier responded "No, who told you that?" There was some embarrassment all round. The
Brigadier told Mr Godsman to speak to two other officers "Suhail" and "Khalifa"
who had raised certain issues about the equipment with him. Arrangements were in fact made for
Mr Godsman to meet Khalifa who at that time was on vacation. He had been instructed to prepare a report
for SOC on the equipment. He raised a
number of issues with Mr Godsman. One of
them was that the potential end user of the equipment had raised concerns about
it being computer controlled. The
operators' lives would depend on there being no computer fault. Mr Godsman explained that there was a backup
mechanical system. Khalifa said that he
would complete his report but Mr Godsman was still sceptical as to whether
or not there was truly a requirement within SOC for the defenders'
equipment. There was no further contact
from the pursuers between October and December 2000. Then, according to the witness, "out of the
blue" came Dr Aoudi's fax of 9 December
2000
(6/51 of process). Mr Godsman said
that he had no idea what Dr Aoudi meant by saying "other orders are ready
and waiting". To this day
Mr Godsman was unaware of any such other orders. The witness said that the content of the fax
simply made his scepticism increase.
After December 2000 Dr Aoudi was constantly telephoning
Scott Jamieson even though Jamieson had by that time left the defenders'
employment. Mr Godsman expressly
asked Dr Aoudi to stop making such calls.
Dr Aoudi was also sending constant emails to Mr Godsman and David
Smith. In these communications
Dr Aoudi was expressing his concern that the defenders had entered into a
contract with Al Badia. He
maintained that the defenders would singularly fail to get an order without his
involvement. If others were to be
involved, they should be as his partners.
On 22 December 2000 Mr Godsman emailed
Dr Aoudi in the terms set out above (6/56 of process).
[83] That
communication elicited the response from Dr Aoudi (6/57 of process).
Mr Godsman did not know what Dr Aoudi was referring to
in using the expression "the new big order" in that communication. The witness said that he was aware of the
quotation 6/59 of process. Despite his
emerging scepticism about Dr Aoudi and the pursuers, Mr Godsman wrote to
Dr Aoudi on 2 February 2001, 6/62 of process in the
terms set out above.
[84] The
reply from Dr Aoudi came in his email of 4 June (6/77 of process). As has been seen Mr Godsman followed that
reply up with another email of 5 June 2001 (6/78 of process). In the event Al Badia did not progress
matters any further. There has been no
contact between the defenders and Al Badia since the last meeting with the
Brigadier. As has been seen a Minute of
Agreement between the defenders and Neibal (6/82 of process) was drawn up. Dr Aoudi, in his email of 29 November 2001 proposed some changes to
it. Mr Godsman said that the defenders
did not agree to any of these proposed changes.
The Minute of Agreement was, in any event, signed.
[85] Mr
Godsman's evidence was that from November 2001 until May 2002 there was
absolutely no further contact with Mr Aikibi who was the contact person at
Neibal. He could not be contacted. There was no further contact between the
defenders and Dr Aoudi from November 2001 until on 23 December 2004 when
he made his claim for commission (6/25 of process) and Mr Godsman had, of
course, in May 2002 emailed Dr Aoudi advising him that the agreement with Neibal
was over (6/84 of process).
[86] Mr
Godsman then went on to explain how the contract between the defenders and SOC
was achieved. In the latter part of 2002
he was in Abu Dhabi on other business. He had the telephone number of Colonel
Khalifa. Colonel Khalifa, who was in
charge of research and development, had said to Mr Godsman previously that
if Mr Godsman was ever in Abu Dhabi he should contact him because he was
always interested in learning about the defenders' products. Mr Godsman telephoned the Colonel who invited
him to come to see him. Mr Godsman went
to his office and showed the Colonel the defenders' up to date catalogue. Colonel Khalifa telephoned someone else
to come and see the catalogue. The other
person was Major Ashehi who was in charge of diving operations by that
time. The Major looked at the catalogue
and pointed out equipment he would have an interest in, including the
defenders' range of rebreathers. The
Major said that he would like to have a demonstration of the defenders'
equipment in which he was interested.
Mr Godsman, having regard to the history of matters, to date, was
not prepared to carry out another demonstration in Abu Dhabi. He advised the Major that if he wished to
come to the defenders' facility at Aberdeen he would be welcome to do
so. Prior to this meeting, the business
development manager of IGG was visiting London. He contacted the defenders and said that his
company would like to represent the defenders in the UAE. Mr Godsman had a short meeting with this
gentleman. Mention was made of the
company having a close connection with the Royal family. Mr Godsman was suspicious and nothing
was agreed at that time. In the meantime
the defenders were invited by a UK company known as the BCB
Group, to do a demonstration of a communication system. The company, in turn, referred them to
another company in Abu Dhabi called Scotrade. A demonstration was carried out for the SOC. Paul Haynes went and carried out the
demonstration at the diving section of the SOC.
During his visit he was contacted by IGG. He had a meeting with them. They expressed a wish to represent the
defenders for the sale of the stealth rebreathers plus five or six other types of
equipment to the SOC. Mr Godsman had not
believed there was any connection between his meeting with the Major and the
demonstration that was carried out by Paul Haynes on this occasion.
[87] Mr
Godsman was invited to meet representatives of IGG as a result of which he
signed a two year agreement with IGG for them to represent the defenders. It was what Mr Godsman described as a
"standard agreement". Commission was to
be agreed on a case by case basis. The
initial understanding was that the defenders would sell equipment direct to the
SOC. IGG subsequently telephoned the
defenders to make arrangements to set up the visit of SOC to Aberdeen. The defenders were told that the SOC wished
to look at the defenders' range of rebreathers and communications
equipment. The visit, which lasted three
days, took place towards the end of 2002.
Five persons attended, including the Major, and a representative of
IGG. The Major explained to Mr Godsman
that SOC were interested specifically in the defenders' latest version of the
stealth rebreather - the non-magnetic version which they wished to employ in
mine clearing operations. Mr Godsman
learned that the SOC already had a set of rebreathers but they were not capable
of being used for disabling mines.
Mr Godsman knew that the Major and his colleagues intended to
travel on to Germany. He surmised that they went to talk to the
defenders' competitors Dragor. A
Mr Obaid of IGG subsequently informed Mr Godsman that an order would be
placed for equipment but that it would be easier for the SOC to deal directly
with IGG with the equipment being sold, in the first place, by the defenders to
IGG. Mr Godsman said he had no
particular problem with this suggestion.
IGG were to open a letter of credit in favour of the defenders. The invoice issued to IGG for the provision
of the equipment is 6/85 of process, was issued by the defenders on 10 June 2003. It related
not only to a purchase of 24 rebreathers but several other items. Mr Godsman, in evidence in chief,
explained how the prices on the invoices were arrived at. This he did under reference to 7/13 of
process. He himself had been involved in
working out the prices and the sheets comprising 7/13 of process were used for
that purpose. He explained that the list
price quoted for the diving set was different from what was quoted in 1998
since it related to a different type of set, namely the "combat set". The list price in 7/13 of process related to
a "mine set" which had been developed in 2001-2002. Included in the make up of the price was a
"negotiation allowance" of 10% which represented a discount from the price made
to the customer. Commission was stated
to be 15% which was the figure, initially, agreed with IGG. The figure, Mr Godsman said, was more than
what the defenders would normally have agreed but such was their confidence in
obtaining the order through IGG they were prepared to agree more in this
instance. The production 7/13 of process
would have been prepared, the witness said, following the SOCs visit to Aberdeen. There was no "uplift" in favour of IGG
included in this pricing. Under
reference to Dr Aoudi's invoice No.6/86 of process, Mr Godsman said that any
suggestion that there was any relation between it and 6/85 of process was
preposterous. A different pricing
structure was involved in compiling 6/85.
It related to a different product.
The market was different from that which had obtained when the previous
2001 quotation was issued upon which Dr Aoudi said his invoice was
based. The equipment now being supplied
was designed for mine clearance. The defenders
had no competitors for this product. The
prices in the offer to purchase from IGG (6/98 of process) were in the same
terms as the prices set out in section 1 of 7/13 of process. Mr Godsman assumed and accepted that IGG
must have added on something to the price to be paid by the SOC. In the event, he said, the defenders did not
pay IGG any commission. He had also been
able to negotiate the discount down from 10% to 5%. When Mr Godsman received no.6/86 from
Dr Aoudi, some 3 years since last hearing from him, he said that he found
it to be unbelievable. He was very
surprised to discover that Dr Aoudi had got possession of the defenders'
invoice 6/85 of process. The witness
said that he considered the case being made by Dr Aoudi for payment was
preposterous since there had been no communication from him since "his last throw
of the dice" in bringing Neibal onboard.
[88] In
cross examination Mr Godsman said that Mr Smith had been invited to leave
the defenders for a great number of reasons, only one of which was the discovery
that he had been discussing "uplift" payments with the pursuers. Mr Godsman repeated his disapproval of
agreements with agents about unspecified uplift payments beyond agreed
commissions. Mr Godsman said that the
sums specified in 6/22 of process were being raised at the quotation
stage. It was completely unstated as to
whom any such payments were to be made and in respect of what. The witness accepted that after the date of
6/6 of process, the pursuers had been acting as agents for the defenders. The fact that Dr Aoudi was Palestinian might
have been the cause of his not being regarded as an appropriate person to act
as agent in dealings with the SOC. Mr
Godsman said that he was absolutely certain that the involvement of Major Ashehi
setting up the new diving unit and his requirement for non-magnetic sets, was
the reason for the order being placed which was in the event placed. Prior to that he did not consider that there
had been any real intention on behalf of the SOC to place an order. It was in addition the selling job which the
defenders themselves had done on the Major and his colleagues which had brought
about the transaction. He did not accept
that such would not have taken place without the pursuers' involvement.
Submissions
for the Pursuers
[89] Counsel
for the pursuers invited the Court to sustain the pursuers' first and second
pleas-in-law and to grant decree for the sum first concluded for. His alternative motion was that the Court
should sustain the pursuers' first and third pleas-in-law and grant decree for
the sum second concluded for. Counsel
set out eight propositions.
[90] The
first was that the evidence established that the pursuers were acting as agents
for the defenders between 1998 and 2001.
The next proposition was that an agent was entitled to be paid
commission when it was established that he had made a material contribution to
a purchase or sale on behalf of his principal.
The third point made by counsel for the pursuers was that in determining
the question as to whether a material contribution had been made, proof that
the agent had effected an introduction between the principal and the other
party to the transactions was of considerable significance. Counsel's fourth proposition was that delays
in procurement of the contract do not preclude the Court from finding a
material contribution to the bringing about of the transaction. The fifth proposition was that the
intervention of a third party may not prevent the Court from finding that there
has been a material contribution by the agent.
Counsel's sixth proposition was that, on the evidence, the pursuers, in
the present case, did make a material contribution to the procurement of the
contract obtained by the defenders in 2003 for the sale of the 24 rebreather sets. The next proposition was that the pursuers
were entitled to payment of commission on the basis agreed between the parties
and on the evidence were entitled to recover the sum first concluded for. The last proposition was that if the pursuers
were not entitled to payment of the sum first concluded for, which required
proof of an agreement regarding "an uplift payment", then they were entitled to
payment of 10% commission which was represented by the sum concluded for in the
second place.
[91] Junior counsel
for the pursuers then proceeded to cite certain authorities in support of some
of the foregoing propositions. The first
of these was the case of Robertson v Burrell (1899) 6 SLT 368. In that case, the Lord Ordinary,
Lord Kincairney sought to state the law regulating the rights of property
agents for their commission on the sale of a property. His Lordship held that "a property agent is
entitled to commission although the transaction has been taken out of his
hands, and has been settled without his direct intervention in regard to the
final contract, if he introduced the parties as buyer and seller and, was in
fact the causa causans of the sale." He,
furthermore, held that it was not required that it should be proved that the
introduction by the "house agent" should have formed the purchaser's sole motive,
but only that the agent as such materially contributed to the sale. His Lordship went on to say that
"An agent's commission has
even been held to be due when the agent brought intending buyer and seller
together, although, on account of special circumstances, the bargain was broken
off. But if the proprietors sell without
the house agent having been informed, introduced or influenced the purchaser
then the seller will not be liable for commission".
It should be observed, at this stage, that it may be
of some importance to note that that authority was concerned with the position
of a house agent acting in respect of the sale of house properties. It may be, as shall be seen, that its
application to the kind of factual circumstances with which the present case is
concerned requires some degree of caution.
The case of Walker, Fraser & Steele v Fraser's
Trustees 1910 S.C.222, next referred to by counsel for the pursuers, was
also a case involving estate agents. The
owner of an estate employed estate agents to sell an estate at a minimum price
of £38,000. An individual approached the
estate agents for information regarding another estate. In reply the estate agent sent particulars
not of the estate which had been inquired about but of four other estates
including the defender's estate. The
inquirer was interested in the defender's estate but thought the price to be
too high. Three years later the inquirer
applied to the estate agents for particulars regarding the defender's estate
and obtained these. The estate agents
urged him to buy but he did not do so.
More than a year later the inquirer inserted in a newspaper a description
of the type of estate he was seeking. He
received from the estate owner of the defenders a letter drawing attention to
his estate. Negotiations ensued which
resulted in the sale of the estate to the original inquirer at the price of
£31,000. It was held that the estate
agents' exertions were as a duly authorised agent of the seller, and did to a
material degree contribute to the sale of the estate and therefore the estate
agents were entitled to commission.
Lord Dundas, with whose Opinion, the other Judges of the First
Division agreed, at page 229 said this:
"Shortly put, I think the
test is whether or not the ultimate sale ...was brought about, or materially
contributed to, by actings of the pursuers, as authorised agents of the
defender. Actual introduction of the
purchaser to the seller is not a necessary element in a case of this sort; it is enough if the agents introduce the
purchaser to the estate, and by their efforts contribute in a substantial
degree to the sale. A careful
consideration of the evidence leads me to hold that the pursuers have
sufficiently compiled with the test indicated".
Later in his Opinion his Lordship said:
"I think the fair inference
to be drawn by the Court, viewing the matter as a jury, from the evidence, is
that the pursuers' exertions, as duly authorised agents in the matter for the
defender, did to a sufficient extent contribute to the ultimate purchase of the
estate ...".
The Opinion of Lord Dundas was approved of in the
House of Lords in the subsequent case of Brett
& Co v Bow's Emporium 1928
S.C.(H.L.) 19. This case involved a
company who carried on business as "agents for the sale of businesses". They sued the defenders for a sum
representing the commission which they alleged was due to them from the
defenders in connection with the purchase by the defenders of a business. The House of Lords held that the case was one
which raised pure questions of fact. The
report of the case contains only extracts from the speech of Lord Shaw of Dunfermline, who, in the course of his
speech, made certain observations regarding the law. At page 20 he adopted the dictum of
Lord Dundas in Walker, Fraser &
Steele cited above which begins "shortly put". Lord Shaw then continued:
"In the end it comes back
exactly to the line which has been so long adopted in the law of England, and
which is thus expressed by Chief Justice Erle in Green v Bartlett:- 'The
question whether or not an agent is entitled to commission on a sale of
property has repeatedly been litigated;
and it has usually been decided that, if the relation of buyer and
seller is really brought about by the act of the agent, he is entitled to a
commission although the actual sale has not been affected by him'. There is no difference, whatsoever, as it
appears to me, between the law thus laid down by Erle, CJ and that laid down by
Lord Dundas".
His Lordship concluded:
"In my view the sum of the
matter is as follows:- (1) When it is proved - and it must, of course, be
proved - that parties to a transaction are brought together, not necessarily
personally but in the relation of buyer and seller, through the agency of an
intermediary employed for the purpose, the law simply is that, if a transaction
ensues, the intermediary is entitled to his reward as such agent; (2) nor is he in disentitled thereto because
delays have occurred, unless the continuity between the original relation
brought about by the agent and the ultimate transaction has been, not merely
dislocated or postponed, but broken; and
(3) finally, the introduction by one of the parties to a transaction of another
agent or go-between does not deprive the original agent of his legal rights,
and he cannot thus be defeated therein".
In the present case, counsel for the pursuers
submitted that although there had been delay between the introduction of the
defenders to the SOC the continuity between the introduction and the
transaction had not been broken but merely dislocated or postponed. The pursuers brought the SOC and the
defenders together in the potential relationship of buyer and seller. The function of IGG was simply that of
intermediary and guarantors for a sale always intended by the SOC. What one was looking for was whether or not
it could be said that the pursuers were an effective cause of the ultimate
transaction or whether or not they had materially contributed to it. The authorities just cited, it was submitted,
made clear the importance of an introduction being affected by the agent. In Gibb
v Bennett (1906) 14 S.L.T.64 the
Lord Ordinary (Lord Johnston) posed the question, at page 66, as to
whether the sale of the pursuer's business was a remote consequence of the
pursuer's agency or had it been obtained through the agency. His Lordship continued:
"This class of question must
always be one of circumstances, on which different minds may form different
impressions, but I have come to the conclusion that the ultimate transaction in
the present case was not a remote consequence, but was brought about by or
through the pursuer's agency in a sufficiently direct manner to entitle him to
his commission".
Later on in his Opinion Lord Johnston said:
"But for the pursuer's
action ... the sale .. would never have taken place. That per
se might not be sufficient ...I think ... the transaction was so closely
attributable to the pursuer's original introduction as to entitle him, as the
defender himself originally conceived, to his commission".
Reference was then made to the decision of The Privy
Council in Burchell v Gowrie and Blockhurst Collieries Limited
1910 A.C.614. In that case an agent
sought to recover an agreed commission on the proceeds of a sale of a mining
property by the respondent company. The
company contended that the agent was not the efficient cause of the particular
sale affected. It was held that as the
agent has brought the company into relation with the actual purchaser he was
entitled to recover the commission although the company had sold behind his
back on terms which he had advised them not to accept. In giving the judgment of the Board,
Lord Atkinson, at page 624 said:
"There was no dispute about
the law applicable to the first question.
It was admitted that, in the words of Erle CJ in Green v Bartlett, 'if the
relation of buyer and seller is really brought about by the act of the agent,
he is entitled to commission although the actual sale has not been affected by
him' or in the words of the later authorities, the plaintiff must shew that
some act of his was the causa causans
of the sale (Tribe v Taylor), or was an efficient cause of
the sale (Millar v Radford)".
At page 625 his Lordship said:
"......if an agent such as Burchell
was brings a person into relation with his principal as an intending purchaser,
the agent has done the most effective, and, possibly, the most laborious and
expensive, part of his work, and that if the principal takes advantage of that
work, and, behind the back of the agent and unknown to him, sells to the
purchaser thus brought into touch with him on terms which the agent theretofore
advised the principal not to accept, the agent's act may still well be the
effective cause of the sale".
Junior counsel for the pursuers founded particularly
on the last dicta as showing the high
importance, in deciding such matters, of the introduction by the agent of the
purchaser to his principal. In this
connection reference was also made to Allan
v Leo Lines Limited (1957) Lloyd's
Rep 127 where Devlin J (as he then was) in the context of a claim by a
shipbroker for commission on the sale of a ship, emphasised the importance of
the fact that the broker had elicited the introduction of the buyer to the
seller (at pages 132-133).
[92] Turning
to how the Court should regard the evidence of the witnesses in the present
case, counsel for the pursuers said that he had to accept that Dr Aoudi's
evidence was at times difficult to follow.
It might be suggested that his evidence, and the written correspondence
from him, contained elements of exaggeration but, said counsel, much of the
witness's evidence was, ultimately supported by the documents, taken as a
whole. Mr Al Akra was, it was
conceded also, a difficult witness to follow, but he at least had been
disarmingly frank in his admission that he had attempted to take the business
from the pursuers. Mr El Masra
should be regarded as a straightforward and frank witness. His position regarding what happened at the
Novotel Hotel was, it was said, supported by what was contained in subsequent
documents. Counsel for the pursuers
accepted that the defenders' witness, Major Ashehi, was a straightforward
witness. As far as the defenders other
witnesses went, a question mark might be raised over some of Mr Jamieson's
evidence since he was, it was said, clearly seeking to protect Mr Smith
and the defenders. Mr Godsman in his
evidence was making a clear attempt to lay blame at the door of Mr Smith for
bad practice in discussing uplift payments with Dr Aoudi. Counsel for the pursuers submitted that there
was no doubt that the pursuers were appointed as agents for a period of six
months by virtue of 6/6 of process, but that they continued to act as such well
beyond six months. It was the pursuers
who established contact with the SOC. It
was also clear that the pursuers did a considerable amount of work to promote
the defenders' products. They arranged
for a presentation to be made by Scott Jamieson. Questions regarding the
product were passed back and forth through Dr Aoudi. Accommodation and transportation were
provided by the pursuers. Dr Aoudi
observed and co-ordinated activities of Al Badia in the first place and
then Neibal to assist in promoting the transaction. Dr Aoudi provided advice on the text of
letters to the SOC and assisted in the completion of quotations. The demonstration in 1999 was arranged by the
pursuers.
[93] On
turning to address what were in fact the terms of the contract between the
parties, counsel for the pursuers sought leave to amend in terms of a proposed
Minute of Amendment, No.29 of process.
In particular he sought to add to Condescendence 2 the following
averments:
"Esto no verbal agreement was concluded at the Novotel (which is
denied) an agreement was constituted verbally and in writing by 7th December 1998 at the latest. Esto
such an agreement was not concluded in the terms above condescended upon (which
is denied), it was concluded verbally and in writing, in the terms reflected in
David Smith's letters to the pursuers of 2nd, 3rd and 7th
December 1998 which terms are referred to and held to be incorporated herein brevitatis causa."
The amendment also sought to add two new conclusions
and a new plea-in-law 3. The two
new conclusions seemed to seek to address the difficulties which the witness Dr Aoudi
had got into in explaining the calculation of the sums he was suing for. The only reason given by counsel for the
pursuers for seeking to amend, in these terms, at such a late stage in the proceedings,
was that the proposed amendment might reflect better the state of the evidence.
[94] The
motion to amend was opposed by counsel for the defenders. To allow amendment, it was submitted, would
cause significant prejudice to the defenders.
The whole action, to date, had been premised on a concluded contract
having been entered into on certain terms at the Novotel Hotel. The proof had been conducted on that
premise. The defenders'
cross-examination of Dr Aoudi had been conducted on the basis that that
was the case. As far as the new
conclusions were concerned, there were no averments to support them.
[95] I
refused the motion to amend in terms of the Minute of Amendment. In doing so I took the view that the
averments sought to be added came far too late in a situation where no
reasonable explanation had been given for seeking to add them at this
stage. This being a commercial action,
there had been significant case management of the cause. It is a case based on contract. Right up until closing submissions, the
pursuers had based their claim on a contract concluded in the Novotel Hotel on 2 June 1998. Their
principal witness, Dr Aoudi, maintained this in his evidence at the
proof. To permit amendment, in the
foregoing circumstances, to allow the pursuers to get over a possible
difficulty in proving their case as pled, would be gravely prejudicial to the
defenders and no reasonable explanation for that state affairs had been given
on behalf of the pursuers. Later,
counsel for the pursuers sought to have the sums contained in the proposed new
second and third conclusions in the Minute of Amendment as substitutes for the amounts
in the existing Conclusions 1 and 2.
The motion to amend on those terms was not opposed and I granted it.
[96] In
advancing his submissions further, counsel for the pursuers contended that the
sale of the rebreathers in 2003 was for exactly the quantity which had been
envisaged would be sold when the quotations were sent in 1998 and 2001. The product in question was simply a
development of what was their product quoted for in terms of 6/59 of
process. Major Ashehi had, in his
evidence, said that in his experience sales orders might be produced within 12
months from initial enquiries being made but that they could take 2-5 years if
problems arose, for example, confusion about who were to be the agents. The Major conceded that there was a reason
for delay in the present case. There
were initial doubts about the use of the equipment in saline conditions. In September/October 2000 when Mr Godsman
met Colonel Khalifa, all the elements were in place for an order to go
ahead. All that was needed was the
rejection of the possibility of the existing equipment being modified by the
American company Carlton and satisfactory assurances
by the defenders about certain technical matters. All the work for producing an order had been
substantially done in 1998 and 1999. The
introduction of IGG did not elide the pursuers' work, it complemented it. Following the quotations submitted in 2000,
Captain Fadhel Al-Kaabi had left SOC and had joined IGG. He knew of the transactions. It was through the pursuers' agency that Al-Kaabi
became familiar with stealth products.
The effect of the initial introduction by the pursuers was never broken.
The relationship set up by that
introduction could be seen to run through the history of the transaction. While it was clear that intermediaries were
involved, Al Badia and then Neibal, this was to the knowledge of the
defenders and these intermediaries operated under the pursuers'
"umbrella".
[97] Counsel
for the pursuers then turned to address the question of the quantification of
the claim. He accepted that the evidence
on this was somewhat contradictory. He
invited the Court to hold that the evidence supported Dr Aoudi's repeated
assertion that the parties had agreed that, in the event of an order being
placed, the pursuers would be entitled to a 10% commission plus any further
amount which as counsel for the pursuers, though not any of the witnesses for
the pursuers, put it "the market would stand".
Dr Aoudi's evidence had been that the possibility of a 30% uplift
payment was discussed as the Novotel Hotel meeting but that that matter was
qualified by subsequent dealings between the parties. That approach, however, it has to be noted,
is not referred to in the pursuers' pleadings.
Counsel for the pursuers however contended that 6/20, 6/21 and 6/22 of
process were reflective of the true position.
It had to be accepted that Dr Aoudi was unable to explain the
calculations set out in 6/22. Although
no witness spoke to this, counsel for the pursuers said that the computation of
the figures set out in 6/22 resulted in a 37.99% uplift. The prices set out in the quotation 6/59
process reflected an uplift on the base price to that extent. Dr Aoudi in preparing his calculations
did not know what the base selling price of the equipment was as at 2003. He, or his advisers, had used the figures in
the quotation 6/59 and 6/22 and had sought to apply these to 6/85. In essence, in any event, what he is claiming
was the sum charged to the SOC above the defenders' then selling price. Counsel did accept, however, if the agreement
regarding uplift payments was to be found in 6/22 of process, then this
required one to apply 37.99% of the base price in 2003 as now known. Carrying out that exercise, counsel
submitted, in respect of the 24 rebreathers brought out the amended sum sued
for in the first conclusion. This was
all, of course, evidence given by the pursuers' counsel and was not evidence
that had been led at the proof. Neither Dr Aoudi
nor any other witness on his behalf spoke to any of this.
Defenders'
Submissions
[98] In
reply counsel for the defenders invited me to repel all the pursuers'
pleas-in-law and to grant absolvitor. As
regards the witnesses, he invited me to hold that Dr Aoudi was an
incredible witness. He had been evasive
throughout his evidence. He sought to
answer questions not put to him and declined to answer questions put to
him. For example, he refused to say what
arrangement there was between the pursuers and Al Badia regarding
payment. He was reluctant to name who he
said were his contacts within the SOC. Dr Aoudi's
evidence was that he had told the defenders from the outset that it could take
between 2-5 years for an order to be placed.
That evidence was contradicted by Scott Jamieson and Major Ashehi had
said that such a length of time would be unusual. Mr Jamieson has said that Dr Aoudi initially
told him that the requirement was for stealth rebreathers to be provided within
six months. Dr Aoudi had repeatedly
sought to lead the defenders to believe that an order was waiting for
them. Reference was made to 6/39, 6/44,
6/51 and 6/52 of process. Dr Aoudi,
it was said, clearly exaggerated the amount of time that he spent on the
project with reference, for example, to himself and members of his extended
family spending 24 hours a day, 7 days a week on it. I was invited by counsel to prefer the
evidence of Mr Jamieson to that of Mr Al Akra and
Mr Al Masri as to what happened at the Novotel Hotel meeting. Scott Jamieson, it was submitted, gave his
evidence in a straightforward fashion, to the best of his recollection. He had been attacked as to his credibility in
cross-examination under reference to 6/22 of process but he had had no
knowledge of that letter at the time and did not know what Mr Smith's
thinking was in writing it. Counsel for
the defenders invited the Court to hold that Major Ashehi was an entirely
credible and reliable witness who had a unique knowledge of the internal
workings of the SOC. Mr Godsman clearly
did not approve of how Mr Smith had dealt with Dr Aoudi. He was however, it was said, an impressive
witness with regard to the detail of events.
He had considerable experience of doing business in the Middle East and the distinct
sensitivities that are obtained when doing business there. His credibility, it was said, was not
affected by reason of his comments on Mr Smith's conduct. He was clearly distancing himself from
Mr Smith.
[99] Before
turning to address the factual history and the law on the matter, counsel for
the defenders stressed that, in the authorities relied upon by the pursuers,
there had been at the time of the appointment of the agent no purchaser
identified. In the present case the
parties knew who the potential purchaser was from the outset. That was an important factual feature of this
case and distinguished it from the position in the earlier authorities.
[100] Turning
to the facts, counsel for the defenders emphasised that the equipment
ultimately supplied to the SOC was a non-magnetic set, quite different from the
equipment in existence in 1998. The
defenders were market leaders in this equipment. Scott Jamieson said that prior to meeting Dr Aoudi,
he was aware that SOC might have a requirement for rebreathers. SOC was clearly a known and potential
customer. Counsel for the defenders
invited me to hold as credible and reliable the evidence of the Major regarding
the SOC's procedures in relation to procurement of equipment. In the first place he said that they almost
always insisted in purchasing through an intermediary. SOC would first of all require to see the
equipment and if interested would then try to arrange for a demonstration of
it. Thereafter if there continued to be
interest in the equipment the officers responsible would report to HQ
commanding officer or his assistant. The
commanding officer would check with the intermediary or agent regarding after
sales service. If he was satisfied about
this and the recommendation to purchase was otherwise accepted by the commanding
officer, he would recommend the purchase of the equipment to HQ. The recommendation would then go to the
purchasing committee who in turn would issue a purchase order. The timescale would be approximately six
months from the point of the recommendation to the commanding officer and
thereafter a maximum period of one year to complete the contract. Any further delay would normally be
incompatible with their wish to have modern equipment as it became
available. The Major had said that the SOC
did not want to deal with "suitcase" agents.
[101] Reverting
to the evidence as to the initial meeting or meetings in early June 1998 in Abu
Dhabi, attended by Dr Aoudi and Scott Jamieson, counsel for the defenders
suggested that, in the result, the considerable discrepancies among witnesses
as to who attended the meeting or meetings, how long it or they lasted etc did
not matter too much. What did matter was
that the Court should hold that, on the evidence, the pursuers had failed to
prove their case as pled and spoken to by Dr Aoudi namely that a concluded
contract was reached with Mr Jamieson that in the event of a contract
being placed with the SOC the pursuers could add anything they wished as an
uplift to the price of the equipment which uplift would be payable to
them. Mr Al Masri and Mr Al Akra
spoke to a discussion of an uplift of about 30%. The correspondence between the parties after
the first meetings between Scott Jamieson and Dr Aoudi made it clear that
the defenders were only offering to pay 10% commission, see for example, 6/5 of
process. To earn that commission what
was required of the pursuers was, as Mr Jamieson had put it "they had to
close the contract". That was consistent
with Dr Aoudi's own evidence. He
himself never considered it was enough simply to effect an introduction. The several draft agreements produced by the
defenders whereby the pursuers' role on behalf of the defenders, might be
extended, were inconsistent with the pursuers' argument that they could add to
the base selling price of the defenders' goods whatever sum they wished and
recover that sum. They were to be paid
commission, the rate of which was to be agreed on a case-by-case basis. It was Al Badia who had had any contacts
within the SOC and who did the initial work to effect and introduction of the
defenders to the SOC. Dr Aoudi, in
December 1998, was saying that the order had been won. There was simply no evidence that that was
the case. Indeed the evidence of the
Major was that there was not even an initial recommendation at that time. The evidence was that there was never any
recommendation within SOC to purchase the stealth rebreathers at any time prior
to the Major becoming involved in 2002.
Even if there had been a recommendation in 1998 the equipment being
referred to at that time was very significantly different from what was
purchased in 2003.
[102] The
content of the documents 6/20 and 6/22 of process could only be regarded as, at
best, part of a negotiation process, (if it was accepted as it ought to be,
that prior to then, there had been no concluded agreement between the parties
regarding the pursuers being entitled to any uplift payment). The content of 6/20 and 6/22 was ill thought
out by Mr Smith. What appeared to be
proposed could only have been given effect to if there was a direct contract
between the defenders and the SOC. It
was impossible to say what the 15% and 10% in 6/22 referred to - did they refer
to legitimate expenses incurred or to bribes or to what? Dr Aoudi's evidence that these
percentages reflected expenses incurred by the pursuers' in staff time etc
ought not to be accepted. He was seeking
hundreds of thousands of pounds above the basic 10% commission itself which was
commercially quite unrealistic.
Mr Godsman had said that the defenders would have expected any such
sums to represent expenses actually incurred and which could be vouched. In any event what was being proposed in 6/22
was to apply, if at all, only to the quotation made at that time.
[103] Counsel
for the defenders was prepared to accept that the pursuers had expended some
time and effort on behalf of the defenders between December 1998 and March 1999
but not to the extent suggested by Dr Aoudi. Between April and August 1999, when no order
was forthcoming, there was an erosion of confidence on the part of the
defenders in the pursuers as spoken to by Mr Godsman, particularly when Dr Aoudi
was giving assurances that an order was imminent and then was constantly giving
excuses as why it did not materialise.
Between August 1999 and October 2000 little happened except for the
dispute between the pursuers and Al Badia.
The difference between the pursuers and Al Badia came to affect the
SOC particularly when Dr Aoudi started to talk to the SOC about the
involvement of Neibal after he had heard of the defenders' agreement with
Al Badia. Thereafter Dr Aoudi was
bombarding the defenders with inaccurate and exaggerated statements regarding
the imminence of an order or indeed orders from the SOC. The Major had given evidence that even at the
time of Mr Godsman's meeting with the Brigadier in April 2001, there was
no recommendation that the SOC should purchase the defenders' equipment. It was significant, it was submitted, that
when Mr Godsman tried to sort out the difficulties and confusion that had
arisen over representation and to repair the damage done, he was corresponding
with Dr Aoudi in 6/75 and 6/77 and no mention was being made of any uplift
to the price. In all the correspondence
between Dr Aoudi and Mr Godsman no mention was ever made of any
uplift.
[104] The
Agreement between the defenders and Neibal, 6/82 of process was to endure for
six months with the possibility of renewal.
As a matter of contract law, this Agreement, it was submitted,
superseded all prior arrangements with the pursuers because it was brought
about by the intervention of the pursuers and its terms were discussed with Dr Aoudi
who accepted these. Any entitlement on
the part of the pursuers to receive commission, thereafter, was based on the
premise that Neibal would get the contract for the defenders' equipment. Reference was made to 6/77 of process. This showed, it was said, that Dr Aoudi was
accepting that Neibal was now required to be the effective cause of obtaining
the contract. The Neibal Agreement came
to an end without the order having been placed.
Counsel for the defenders invited the Court to hold that the order came
to be placed as a result of the dealings between Mr Godsman and the Major and
the appointment of IGG by the defenders to represent them. The actings of the Major showed that there
had been, before he came on the scene, no pre-determined policy whereby the
order was to be placed. The Major had allayed
the SOC's concerns regarding the capability and suitability of the equipment
and by that time, IGG were already in place.
[105] The
quotation which was prepared by the defenders thereafter related not only to 24
stealth rebreathers but other equipment.
That quotation was prepared under reference to 7/13 of process. The price structure contained in that
document was clearly different from what was obtained in 1998. Moreover, Mr Godsman, in his evidence,
had made it clear that the rebreather sold in 2003 was different in character
to which different pricing applied and the quotation was made in different
market conditions. The quotation went,
in the first place, to IGG and then was transmitted to the SOC (6/98 of process). Mr Godsman subsequently went to Abu Dhabi and signed the Agreement
which was 7/1 of process with IGG. It
was only shortly before then that Mr Godsman discovered that the transaction
was to be carried through by IGG purchasing the equipment and selling it to the
SOC. It was to be accepted that the 15%
commission was not, in the event, paid and that element of the price
represented a windfall to the defenders.
The final decision, therefore, had not involved either the pursuers or Neibal. The involvement of Major Ashehi, who had no
knowledge of or dealings with the pursuers, was the driving force of the
contract coming into force. By the time
the order was ultimately placed the pursuers were effectively "off the
scene".
[106] The
invoice intimated by Dr Aoudi, and on which he relied in these proceedings,
showed no knowledge of how the contract price was calculated. He or those advising him had taken what he
claimed was the basis of calculating prices for 1998 and applied that basis to
the quotation sent in 2001 to obtain a base price and then compared that with
the price which was apparently paid in 2003.
This was entirely contrived.
Whatever had been the effect of any dealings between the parties in 1998
had to be considered in the context of all that had transpired since then.
[107] Counsel
for the defenders then turned to address the law on the matter. In the first place he contended that the
effect of the Agreement between the defenders and Neibal was to terminate any
entitlement on the part of the pursuers to obtain commission.
[108] Secondly,
the pursuers did not meet the appropriate causative test. Looking at the whole process from beginning
to end there had been a clean break.
Reference was made to a speech of Lord Shaw in the case of Brett at p. 21 and Devlin J. in Allan at p. 132.
[109] Thirdly,
the standard test, it was submitted, in determining whether an agent had earned
remuneration was whether he had been the effective cause of bringing about the
transaction with his principal. Counsel
referred me to certain passages in Bowstead
on Agency. At page 277, para.
7-027 the following principle is stated:
"Subject to any special
terms or other indications in the contract of agency, where the remuneration of
an agent is a commission on a transaction to be brought about, he is not
entitled to such commission unless his services were the effective cause of a
transaction being brought about."
At page 280, para. 7-029 the following explanation is
given:
"In some cases the
introduction is crucial (see Allan v Leo Lines Ltd).... But it is submitted
that it is the word 'effective' which is the most significant. 'Effective cause' means more than simply
'cause'. The enquiry is whether the
actions of the agent really brought about the relation of buyer and seller, and
it is seldom conclusive that there were other events which could each be
described as a cause of the ensuing sale.
The factual enquiry is whether a sale is really brought about by the act
of the agent."
[110] Reference
was then made by counsel to Chitty on Contracts at para. 31-142 where it is
stated:
"Subject to clear
indications to the contrary, where the agency contract provides that the agent
earns his remuneration upon bringing about a certain transaction, he is not
entitled to such remuneration until he is the effective cause of the
transaction being brought about."
I was then referred to two recent English cases in
which the "effective cause" test was applied, namely Egan Lawson Limited v Standard
Life Assurance Company (2001) EGLR 27 and HMH v CECAR (2000) 1 Lloyd's
Law Reports 316. Applying that test to
the facts and circumstances of the present case, counsel submitted that the
pursuers had not met it. They were not
the causa causans of the order being
placed with the defenders.
[111] Counsel
went on to say that if he was wrong in the submissions he had made, thus far,
then the question would still arise as to what the pursuers were entitled
to. The Court should not hold that there
was any concluded agreement regarding an uplift payment to which the pursuers
were entitled. The pursuers had failed
to establish that any such agreement as they contended for was concluded on 2 June 1998.
[112] If the
Court, for any reason, were to accept Dr Aoudi's evidence that 6/22 was
Mr Smith putting into effect a provisional agreement regarding an uplift
then any such payment was premised on the order being placed by the SOC
directly with the defenders which, in the event, did not occur. In any event, the Court should accept Mr Godsman's
evidence that the references in 6/22 would have been treated, and should only
have been treated, by the defenders as references to expenses actually
incurred. They were not incurred by the
pursuers in relation to the 2003 order.
Counsel accepted that the pursuers, in principle, would have been
entitled to a 10% commission but if, and, only if, they had been the effective
cause of the actual order and only if any such entitlement had not been brought
to an end by virtue of the agreement between the defenders and Neibal. Neither of the preconditions was met by the
pursuers.
[113] In a
short reply, counsel for the pursuers referred me to the case of Nahum v Royal Holloway & Bedford New College (1998) TLR 715 as an
example of the Court re-emphasising the significance of an introduction by the
agent. Counsel also objected to counsel
for the defenders seeking to argue that the Neibal Agreement had terminated any
subsisting entitlement on the part of the pursuers to payment of
commission. No notice of any such line
of defence had ever been given before the submission was made. The Neibal contract did not break the chain
of causation between the pursuers' activities on behalf the defenders and the
concluded sale. Counsel for the pursuers
was prepared, however, to accept that it might be argued that the terms of the Neibal
Agreement may have affected the pursuers' right to continue to claim any uplift
payment. It did not however affect any
claim in respect of 10% commission.
Decision
[114] The first issue that I have to decide is
what the contract was between the parties and, in particular, have the pursuers
established the contract upon which they sue?
The first question can be sub-divided into two further questions - have
the pursuers established the contract which they sue upon in all its material
terms in relation to conclusion 1.
If not, have they established it in relation to support their
alternative claim under conclusion 2.
[115] Before
endeavouring to deal with those questions it is appropriate, I think, that I
make some preliminary observations about this case. As the evidence emerged it seemed abundantly
clear to me that the circumstances in which orders for military equipment are
placed by the military authorities in the UAE are considerably different from
where an agent, in a domestic context, may be employed to obtain a purchaser
for a property or business. As counsel
for the defenders pointed out, from the outset of the parties' dealings, there
was to be only one purchaser who was identified. That factor in itself invests the
circumstances of the present case with a character somewhat different from, for
example, the estate agent cases relied upon by the pursuers' counsel in his
submissions. Dr Aoudi of the
pursuers, in his evidence, appeared to me to accept that his understanding was
that the pursuers' task was, through their efforts, to bring to actual
completion a sale of the defenders' stealth rebreathers to the SOC. That that was the position is, to some extent,
reflected in the fact that the contract between the parties for the extension
of the agreement between them, in geographical location, and in range of
equipment, in its draft and final forms was made conditional on the order
actually being placed.
[116] The
proof, furthermore, revealed that the military authorities of the UAE do not
normally, if at all, choose to contract directly with foreign manufacturers of
military equipment. The normal and
preferable procedure is that the purchase is made from a "representative" of
the manufacturer who is based in the UAE and with whom the forces will have
direct contractual relations. There may
also be situations where the representative will operate as an agent, but he
will still require to be based in the UAE and the military forces, in both
situations, will exercise a keen interest and concern in the status and nature
of "the representative" or agent. Given
the potential significance of the role of the representative or agent in such
transactions, and the importance, in particular, of "influence" being exercised
for the purpose of obtaining such contracts, the agent or representative may,
on occasion, seek to suggest a rate of remuneration far in excess of any
consideration that would be regarded as commercially appropriate or sensible in
ordinary domestic business transactions.
That such remuneration, if agreed to, may to a considerable extent, if
not entirely, come from the purchaser, by virtue of what he pays for the goods,
in excess of the manufacturer's price, makes any such practice all the more
different from what I think would be regarded as normal in ordinary domestic
agency relationships. So far as the
evidence in this case went as to how such income may be distributed and applied,
I was left with some question as to whether it might mark the crossing of the
line between properly earned remuneration and what might otherwise be described
as "bribes", if looked at by persons not operating in such exotic commerce.
[117] As
regards the evidence led in this case, I found, on the whole, the witnesses led
on behalf of the defenders to be more satisfactory, both in the evidence they
gave and in the giving of it. Where
there was any material conflict of fact as between the pursuers' witnesses'
position and that of the defenders' witnesses, I preferred the position of the
defenders' witnesses. All of the
defenders' witnesses, on the whole, gave their evidence in a straightforward
way and sought to answer the questions put to them. On the whole, I did not consider that any of
them was in any respect seeking to mislead the court or to avoid facing up to a
position being put to them. They did not
seek to address matters not put to them.
They did not prevaricate. They
did not appear to exaggerate. They faced
up to any apparent difficulties in their position which emerged from the case
made against them.
[118] To be
contrasted with how I have just described the defenders' witnesses is how the
pursuers' principal witness, Dr Aoudi, presented himself in the witness
box. There is absolutely no doubt in my
mind, having heard and seen him give evidence over a number of days, that he
had become totally convinced by the rightness of his own cause, to the extent
that accuracy, truthfulness, and proper recall of evidence, fell to be
sacrificed if they were thought to be getting in the way of his advancing his
own position. He, in my judgment, on a
number of occasions, grossly exaggerated the amount of work, effort and expense
incurred by him and others in attempting to secure the order. His various written communications to the
defenders from late 1998 onwards, in which in various ways, he asserted that an
order was waiting to be finalised, was imminent or was waiting for signature,
were far from the truth as at the time they were written. His attempts, in his evidence, to justify
writing in these terms simply, in my judgment, compounded his lack of
credibility. I should also make it
clear, at this stage, that standing what will be seen to be the significance of
his evidence for the case as a whole, that I accepted the evidence of Major
Ashehi in its entirety. He was a truly
independent witness who gave his evidence clearly and carefully and who had a
unique insight into the working of the SOC, in general in relation to its
procedures, and specifically unique knowledge as to how they had, in the event,
decided to purchase equipment from the defenders.
[119] The
pursuers' case, as pled, as to the highly lucrative basis upon which they sue,
as has been seen, is succinctly put in Article 2 of Condescendence. It will be seen from those averments that the
pursuers' case is that all that required to be agreed and upon which they sue,
was agreed between Dr Aoudi and Mr Jamieson at the meeting in the Novotel
Hotel on 2 June 1998. It is to be noted that, in the averments,
there is no reference to any other persons than Dr Aoudi and
Mr Jamieson being present at that meeting.
That, as has been seen, is consistent with what my notes of the evidence
of Dr Aoudi revealed. He did not,
as far as my notes go, at any stage say that the first meeting had been
attended by anyone else. Nevertheless,
two witnesses were led on behalf of the pursuers to speak to their having
attended that meeting and having heard an agreement being made. There were discrepancies in the evidence of these
witnesses, and Dr Aoudi, in any event, as to what, in essence, was
agreed. In the result, I have no
hesitation in preferring the evidence of Scott Jamieson as to what, in
essence, occurred at that meeting. He
gave his evidence in a straightforward fashion and it had the ring of
credibility about it. Mr Jamieson
had no recollection of anyone else having attended the meeting other than
himself and Dr Aoudi. I accept
Mr Jamieson evidence that the only agreement that was reached by the end
of that meeting in the hotel was that he and Dr Aoudi would meet the next
day at Dr Aoudi's office. I found
it to be credible that, as the witness said, he would never have agreed to
appoint the pursuers as his employers' exclusive agents, far less on the terms
averred, at a meeting in a hotel lobby which lasted for about an hour. I also accept Mr Jamieson's evidence
that, contrary to what Dr Aoudi said, Dr Aoudi did not inform him from the
outset that the placing of an order with the SOC might take two to five
years. Mr Jamieson accepted that at the
meeting on the following day at the pursuers' offices, Dr Aoudi did raise
the subject of commission and what the price of the equipment would be. 10% was mentioned in relation to
commission. Mr Jamieson's evidence,
which I accepted, was that he was to fly back to Aberdeen
that evening and he needed to discuss with his superiors at the defenders what
he had discussed with Dr Aoudi. The
appointment of the pursuers as agents, having been discussed with his superiors
and further discussions with Dr Aoudi, was made by virtue of the
correspondence which is 6/5 and 6/6 of process.
By this correspondence the pursuers were appointed as agents for the
supply of stealth rebreathers to the Abu Dhabi Military and the Ministry of the
Interior. They were not appointed
exclusive agents. Their appointment was
stated to endure for a period of six months from 30 June 1998 and was on
the basis that 10% commission was to be paid, which would be passed on to the
customer in the price paid. I accept
Mr Jamieson's evidence that the period of six months was chosen because
that was how long Dr Aoudi had initially said the matter would take. I also believed Mr Jamieson's evidence
that it was agreed between the parties that to earn the commission the pursuers
had to close a sale with the SOC, which is consistent with the commission being
included in the price and Dr Aoudi specifically saying that he was very
confident that he had all the contacts to enable him to close a sale. I am also entirely satisfied that
Mr Jamieson did not, at any stage, agree with Dr Aoudi that the
pursuers should receive all sums charged to the UAE in excess of the base
price. It follows from these findings
that the pursuers have failed to prove the fundamental basis of their case on
Record as to what constituted the contract between the parties. They did not give notice, in averment, or
before the close of the defenders' proof, of any basis of claim other than an agreement
entered into between Dr Aoudi and Mr Jamieson on 2 June 1998. As a result, for that short reason, the
defenders are, in my judgment, entitled to be assoilzied. Albeit that this is a commercial action where
pleadings may not normally be required to go into very great detail, nevertheless
the pursuers must set out, in a contract case, the terms of the contract and
how and when at least these terms were agreed.
If he does so, and then fails to prove the contract which he relies
upon, then, still, according to our rules of pleading and fair notice, he must
fail.
[120] Even if I am wrong about the foregoing, and a more generous
approach to the pursuers' position is allowable or appropriate, so that
averments regarding when, and in what circumstances, and with whom, a contract
has been concluded may not need to be averred with any degree of exactness
then, I am of the opinion, that for a number of other reasons the pursuers
could not, in any event, succeed in this case.
I have already accepted that the pursuers were appointed the defenders'
agents (though not exclusive agents) for the sale of rebreathers to the UAE
military authorities initially for a period of six months, which was extended
thereafter for periods beyond the six months.
But as already alluded to, it was the purpose of that appointment that
the pursuers should, to use the words of Mr Jamieson, "close a sale". This was an agency agreement whereby to
employ the words of Chitty on Contract,
cited above, the agreement provided that the agent "earns his commission upon
bringing about a certain transaction." This
is entirely consistent with Dr Aoudi's own evidence and is consistent with
the context in which both parties were operating, namely that the military
authorities would only deal with a representative or an agent. While I accept that, on the evidence, the
pursuers, and in particular Dr Aoudi, did carry out certain work, and did
incur certain expense, in the hope of concluding such a deal, at least in the
early years of the five year period, with which the dispute is concerned, I am
entirely satisfied that on the evidence, the actual sale of the equipment in
2003, upon which the pursuers based their claim was not brought about by the
pursuers. They were not the effective
cause of it. That that is so, is most
clearly established by the evidence of Major Ashehi. He was quite unequivocal that the SOC would
not have considered the pursuers to be a suitable body with whom to place the
order, or through whom the order might be placed. It was clear that he was the person whose
interest in acquiring the equipment was lit when he came to be in charge of the
diving unit. He had no dealings with the
pursuers, nor Al Badia nor Neibal. He
had never heard of the pursuers until recently and then only in connection with
these proceedings. He had heard of
Al Badia before, but had no dealings with them. He had no knowledge of Neibal. It was he who set out to persuade the SOC
that the technical problems they had been previously concerned about were
unjustified. He went, for example, to Germany
to check out the experience of other users of the equipment. He ascertained that the existing rebreather
equipment of the diving unit could not be modified at a reasonable cost. As a result of all of this it was, as he
said, his recommendation that the defenders' equipment should be
purchased. It was that recommendation
which was acted upon. IGG were a company
with whom the authorities were happy to place the order, because they were of
sufficient status and size to provide the authorities with the assurances they
needed about after sale service and the sorting out of any problems that might
arise from the transaction.
[121] Mr Godsman's evidence, in cross-examination, was that he was
absolutely certain that the involvement of Major Ashehi, particularly his
setting up of the new diving unit, and the requirement at that stage for that
unit to have a non-magnetic rebreather, was the reason for the order being
placed with the defenders. Prior to
that, he did not consider that there was any sufficient interest to make the SOC
place an order. Also, as he put it, it
was "the selling job we did on the Major and his troops which produced the
order". I accept that evidence which is
totally in line with the Major's and is supported by the history of events. Never forgetting that, in this case, the
customer for the goods was already identified, it was for the pursuers, through
their efforts, to persuade that customer to place the order. On the evidence, which I have just referred
to, the pursuers played no such persuasive role. Their initial steps bringing about the
introduction of the defenders to the SOC may have been the causa sine qua non by which the following chain of events occurred,
but it was not ultimately the causa causans
of the transaction. Using the language
of the Court of Appeal in Egan Lawson
and Bowstead on Agency referred to
above, the question is whether, on the facts, the pursuers are to be seen as
having been the effective cause of the contract, or putting matters another
way, can it be said that the actings of the agent really brought about
the relationship or buyer and seller.
These are jury questions to be answered by reference solely to the facts
of the case. I am left in no doubt that
on the facts in this case the pursuers were not the effective cause of the
sale, nor can it be said that they really brought about the particular
relationship of buyer and seller. I was
left with the distinct impression indeed that the pursuers, and in particular
Dr Aoudi, after the initial introduction had been made, were seen by the SOC,
if anything, as being an obstacle to the completion of the transaction. I am satisfied that the evidence established
that neither the pursuers nor Dr Aoudi had had any contacts within the SOC
before being involved with the defenders.
His engagement of Al Badia and, in turn, Neibal to assist him in his
efforts demonstrated, to my mind, that his company, on their own, would have
been unable to bring about the transaction.
Neither Al Badia nor Neibal's efforts in the event were
fruitful. When their efforts, such as
they may have been, proved to be fruitless, there is no evidence that the
pursuers themselves did anything which contributed to the ultimate sale to IGG. On the facts of this case, to use the words of
Mummery L.J. in Egan Lawson at p.30,
the pursuers were "off the scene" from at the latest late 2001/early 2002.
[122] In submissions, as has been noted, counsel for the defenders took
the point that, in law, the effect of the defenders' contract with Neibal,
which was known to and accepted by Dr Aoudi on behalf of the pursuers,
ended any previous relationship between the pursuers and the defenders and this
was objected to by counsel for the pursuers because of lack of prior notice. The fact of the matter, however, is that it
was the pursuers who chose to set out the whole history of matters in the way
they did, including the introduction of Neibal into the history and the
contractual arrangements that were put in place as a result. It does not seem to me that it is for the
pursuers then to complain of the legal consequences of such facts if those
matters are then pointed out by the defenders.
It seems to me that there was some force in the point being made on
behalf of the defenders and that as it was a matter of legal submission
emerging from evidence, led on behalf of the pursuers, the objection taken was nothing
to the point.
[123] The initial agreement between the parties was to endure for six
months. On the evidence the parties
acted on the basis that it continued after the expiry of six months. It is difficult, in my judgment, to see it
continuing after the pursuers agreed that Neibal should be the representatives
of the pursuers and their agreement in 6/77 as to how commission should be
dealt with thereafter. In any event, it
is not necessary for my decision to hold that any previous agreement between
the parties upon which the pursuers now found was extinguished by those
events. It is sufficient that the communings
in question emphasise in a vivid manner that the pursuers by that stage were,
in effect, accepting that they themselves could not achieve a concluded
contract and that their bringing in of Neibal did not bear fruit.
[124] Even if the pursuers had not been faced with the difficulties just
discussed then, in my judgment, they would still, in my view, have faced unresolved
difficulties in relation to establishing the amount of any claim they had. As has been seen, Dr Aoudi's position
throughout was that, from his first meeting with Scott Jamieson, there had been
agreement that the pursuers could recover anything which they
chose to add to the base price of the equipment sold. The amended first conclusion is apparently
seeking to follow that approach. It is
to be noted that Dr Aoudi did not himself accept that there was any limit
to be placed on that figure. Nor was
there any requirement that it should be accounted for by reference to any
actual expenses incurred.
Mr Smith's document, 6/22 of process, upon which considerable
reliance was placed by counsel for the pursuers does not reflect such an
approach. In that document what appears
to be being put forward is the addition by the defenders of 30% to the
prices charged, the 30% being broken into three classes. None of the witnesses, including
Dr Aoudi, could understand the calculations brought about in that
document. In any event, what is
certainly clear is that Mr Smith, in contemplating an uplift payment, was
doing so on a basis not consistent with the basis upon which Dr Aoudi maintained
the agreement was reached. Moreover, and
in the addition, I agree with the defenders' argument that the calculation was
made in respect of a quotation which was in the event never accepted and was
superseded by events.
[125] There is not a scrap of paper thereafter, before the Court, indicating
that any commission to be paid to the pursuers would be anything more than
10%. It is a matter for comment at least
that having regard to the number of times in which commission was referred to
in correspondence between Dr Aoudi and the defenders' representatives
thereafter, Dr Aoudi never thought it appropriate to mind the defenders
that not only would the pursuers be entitled to 10% commission, but that they
would be entitled also to any uplift they chose to place upon the base price of
the products.
[126] The pursuers' approach, in any event and, ultimately, runs into
difficulties with regard to their computation of their claim simply on the
footing that it sought to apply what they claimed to be the 1998 agreement to
the quotations of 1998 and of 2001 and then to interpolate results of that to
the invoice presented by the defenders to IGG in 2003. Dr Aoudi, even after consulting with his
accountants overnight, during the giving of his evidence, could not assist the
court in showing how that exercise was in fact carried out and how it produced
the sum now being sued for. In a way
that was not surprising because his own personal approach, as I understood it,
was simply to claim what appeared to be the addition to the base price of the
goods in 2001. In any event, as both
Major Ashehi and Mr Godsman made clear the 2003 invoice and the
transaction to which it related, dealt with a different version of the equipment
from that which was available in 1998 and 2001.
The pricing structure was different.
The market conditions were different.
The transaction was effected not on the basis upon which the pursuers'
uplift claim was designed to operate, namely that they would be in a
position to add a sum to the price. The
transaction in question was made not directly with the SOC but with IGG as the
purchasers. As noted above, counsel for
the pursuers himself attempted to give evidence by suggesting that the effect
of Mr Smith's document, 6/22 of process, was to provide for an uplift of
37.99% and to apply this to the prices set out in 7/13 of process. But this was not spoken to at all by anybody
in evidence and it is, in my judgment, in any event, an exercise which proceeds
on a basis far from the realities of the situation as revealed in the
proof. The fall-back position advanced
on behalf of the pursuers was to seek the figure of £81,890 as representing 10%
of the commission in the event of the court holding that no agreement had been
established in relation to uplift payment.
I think here the defenders' agreement with Neibal, 6/82 of process, and
the pursuers' acceptance of Neibal thereafter being the representative for the
sale of the stealth rebreathers, with an adjustment of the commission payable
on a deal being closed, presents a difficulty.
The agreement with Neibal, by clause 6, provided that the rate of
commission was to be "agreed between principal and agents on a case by case
basis". No such agreement ever came
about. How the proposal contained in Dr Aoudi's
letter, 6/77 of process, as to how the commission of 10% was to be divided or
how it was intended to operate, in the events that have arisen, was never
resolved in evidence or explained to me satisfactorily in submission by counsel
for the pursuers. I am left accordingly
reaching the conclusion that the pursuers have not established that any
agreement to pay the pursuers 10% commission continued at least beyond the
conclusion of the agreement with Neibal.
[127] On the hypothesis that the pursuers were the effective cause of
the order and had there been Nos. 6/77 and 6/87 of process, my conclusion would
have been that, in principle, the pursuers were entitled to 10% commission.
[128] For all the foregoing reasons, I shall sustain the defenders' second
and third pleas-in-law and assoilzie the defenders.
