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Cite as: [1998] UKPC 39

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West Coast Air Limited v. Gambia Civil Aviation Authority and Others (The Gambia) [1998] UKPC 39 (15th September, 1998)

Privy Council Appeal No. 64 of 1997

 

West Coast Air Limited Appellant

v.

(1) Gambia Civil Aviation Authority and

(2) Attorney General Respondent

 

 

FROM

 

THE COURT OF APPEAL OF  THE GAMBIA

 

---------------

REASONS  FOR  DECISION  OF  THE  LORDS

OF  THE  JUDICIAL  COMMITTEE  OF  THE

PRIVY  COUNCIL  OF  THE   30th  July  1998,

Delivered the 15th September 1998

------------------

 

Present at the hearing:-

Lord Slynn of Hadley

Lord Steyn

Lord Cooke of Thorndon

Lord Clyde

Sir Christopher Slade

  ·[Delivered by Lord Cooke of Thorndon]

------------------

 

1. On 30th July 1998 their Lordships announced their decision that the appeal should be allowed and directed that judgment be entered for the plaintiff in the Supreme Court against the defendants jointly and severally for US$654,654.69 with interest at ten per cent per annum from the date of the writ as claimed (17th November 1993).  The interest rate was that adopted by the Court of Appeal.  The respondents must pay the appellant’s costs before the Board and in the courts below.  Their Lordships were to deliver their reasons later, as they now do.

 

2. This case is the aftermath of a defeated attempt to establish an air service in The Gambia.  Mr. Mario Tosti, an Italian citizen, was minded to start a business there to provide domestic services within the country and regional services to other West African countries and possibly as far afield as Europe.  With the initial encouragement and cooperation of the Gambian authorities, he made for a time progress to that end, incurring much expenditure; but, for reasons which have never been satisfactorily explained, the Government agencies turned against him and ultimately he was forced to abandon the project.

 

3. The company which he had formed for the project, West Coast Air Limited, brought a claim in the Supreme Court of The Gambia for US$1 million damages.  In a judgment delivered on 14th March 1996 the trial judge (Adio J.) found for the plaintiff, awarding US$500,000 with costs and interest.  On appeals by both sides, however, the Court of Appeal (Chomba S.C., President, Ofori-Boateng and Lartey JJ.A.) on 26th June 1997 varied that decision by remitting the assessment of damages, on  a more restricted basis, to the Supreme Court.  With the leave of the Court of Appeal the company now appeals to the Judicial Committee of the Privy Council.

 

4. The material events occurred between 1991 and 1993.  It should therefore be noted that the defaults on the part of the administration of The Gambia were before the coup d’etat of 1994 and the establishment of the second republic in 1997.  The present administration has inherited the liabilities of its predecessors.

 

5. The tale is told largely by three letters which their Lordships will reproduce in full with some linking narrative.

 

6. Mr. Tosti went to The Gambia in late 1991.  He laid his proposal before Mr. B.A. Jallow, then Director of Air Navigation Services of The Gambia Civil Aviation Authority, a corporation wholly owned by the Government, whose functions include organising, carrying out and encouraging measures for the development of aviation in The Gambia.  Mr. Tosti was given to understand that his proposal accorded with Government policy and that he should incorporate a company in The Gambia and submit feasibility studies. These things Mr. Tosti did, and other preliminary activities followed.  On 20th January 1992, on behalf of the Authority, Mr. Jallow wrote the first of the three key letters to Mr. Tosti:-

 

APPLICATION FOR AIR SERVICE LICENCE - WEST COAST AIR

 

7. I refer to your letter dated 3rd January 1992 on the above captioned subject matter.

 

1.Your proposal to establish a regional and domestic air carrier in The Gambia is viewed with great interest and has the unreserved support of The Gambia Civil Aviation Authority.

 

2.It is regrettable that your company cannot be designated to operate scheduled services to Dakar, Nouakchott and Bissau since Gambia Airways have already been designated to operate all the frequencies available under the respective Air Service Agreements between The Gambia and the relevant states.  It is however possible for West Coast Air to be designated to operate schedule services from Banjul to Conakry and Bamako.  In the case of Cape Verde, an Air Services Agreement has yet to be concluded.

 

3.This administration has no objection to issuing an Air Service Licence to West Coast Air to operate a domestic Air Service on condition that the company undertakes to construct and equip the airstrips at the locations mentioned in your proposal, to a standard acceptable to the Civil Aviation Authority in terms of safety.

 

4.The issue of a Development Certificate and the associated duty-free facility is not under the jurisdiction of this office but nevertheless it is almost certain that, this being the first project of its kind to be launched in this country due consideration will be given to your request by the appropriate authority, taking into consideration the substantial financial outlay involved and its contribution to the national bid to improve communication between the urban and the rural areas.  In any case, this office will give its full support to any application submitted by your company on the subject, since the provision of a Servicing and Hangar facility is one of the major items on the Banjul International Airport Masterplan. 

 

5.Finally, there being hardly any restrictions on non-scheduled and charter operations, this office would strongly advise you to explore the possibility of non-scheduled operations where there is no possibility of a designation to operate scheduled services.  This can be applicable to both passenger and cargo traffic. Tourist traffic, though seasonal, also offers good opportunities for charter operations.

 

6.You will find enclosed two copies of CAA Form No 1, which you are to complete and submit to this office together with the following documents for each aircraft:-

(i)Certificate of Registration

(ii)Certificate of Airworthiness

(iii)Certificate of Insurance.

 

8. Please do not hesitate to contact this office for any further information.

 

B A JALLOW

for DIRECTOR GENERAL”

 

9. Thereafter Mr. Tosti was active in many ways.  For example, the company leased and brought to The Gambia a new 17-seater AN 28 aircraft, manufactured in Poland, suitable for short runways.  It had pilots trained in Poland and brought them and mechanics to The Gambia.  It prepared the site for a hangar at Yundum airport near Banjul, the capital of the state.  When that site was taken over by the fire brigade, the company constructed  a temporary shelter for the aircraft instead.  It imported spare parts and arranged for maintenance.  It arranged for fuel supplies and ticket sales, and it promoted the project with tour operators and by newspaper advertising.  It obtained the necessary certificates for the pilots and the plane.  Various test flights were undertaken.  Of particular importance, the company prepared an airstrip at the inland town of Basse.  All this and more was done with official support.

 

10. On 27th June 1992 an official party was carried on the plane from Banjul to Basse for what was described as the maiden flight.  Before the take-off the Minister of Tourism, according to a newspaper report, “thanked West Coast Air and pledged Government’s support to the company”.  The report also recorded that, speaking to a large crowd at the Basse airstrip, the Parliamentary Secretary at the President’s Office, deputising for Vice-President Sabally, urged local businessmen to take advantage of the service and thanked West Coast Air on behalf of the Government.  The Commissioner of the Upper River Division and local Chiefs also joined in the mutual congratulations.

 

11. At that stage the company had a licence for a scheduled domestic air service on the route Banjul/Basse/Farafenni/Georgetown/Banjul for the period from 23rd April 1992 to 22nd April 1993.  It was issued by the Minister of Works and Communications on 23rd April 1992, under the letterhead of The Gambia Civil Aviation Authority. Certain conditions of a straightforward nature were set out and it was expressly stipulated that the Minister reserved the right to withdraw the licence if these conditions were infringed.  Their Lordships note that no other right to withdraw the licence was reserved.  As for the geography of the route, Banjul is on the coast; the state of The Gambia is a relatively narrow corridor of land (much of it only 24 kilometres wide) extending inland for some 470 kilometres along the valley of The Gambia river and surrounded on all landward sides by Senegal; Basse is near the south-eastern corner of The Gambia; Farafenni and Georgetown are other inland towns.

 

12. Some preliminary external flights were also undertaken.  On at least one of these Mr. Jallow accompanied Mr. Tosti.  On 3rd July 1992 the Minister signed two licences for the company for external services during the period from 1st July 1992 to 30th June 1993. One was for a scheduled regional service Banjul/Dakar/Conakry/Bamako/Austria/Belgium/Banjul.

13. Dakar is a port in Senegal, to the north of The Gambia. Conakry is a port in Guinea, to the south.  Bamako is in Mali, to the east.  The other licence was for a non-scheduled service Banjul/Praia/Dakar/Bissau/Mauritania. Praia is in the islands Republic of Cape Verde; Bissau is a port in Guinea Bissau, a small coastal country lying between southern Senegal and Guinea; Mauritania is to the north of Senegal and Mali.  These licences specified conditions and a right of withdrawal for breach in terms similar to those of the domestic licences.  Unfortunately the regional licences were posted to the company at a post office box which it ceased to use.  It did not actually receive them until December 1992.  But nothing turns on that, for their Lordships accept that the regional licences were of no practical use to the company without formal designation by the issuing Government and approval by the Government of the host country.  No such designations or approvals were ever forthcoming.

 

14. The aura of enthusiasm was soon dispelled.  On 13th July 1992 the second of the three key letters was sent to the company:-

 

TERMINATION OF BANJUL/BASSE DOMESTIC AIR SERVICE WEST COAST AIR

 

15. I have been directed to instruct you to terminate your services between Banjul and Basse with immediate effect, until adequate facilities are provided for the security forces at the Basse airstrip.

 

16. This office will inform you of any future developments concerning this matter.

 

B A JALLOW

for Director General”

 

17. That letter, evidently quite unheralded, marked the beginning of a long phase of official non cooperation with and hostility to the company.  Between then and June 1993 Mr. Tosti made many attempts by letters and personal approaches to obtain explanations of this change in attitude and to rescue or advance the project.  He could not understand the objection about security: police, customs and national security personnel appeared to be conveniently on hand at Basse.  The subject had not been raised at all before the July letter.  He thought that “someone was looking for money”.  He obtained some interviews, including one with the Vice-President, but no satisfaction.  His company was not formally designated by the Government for regional services, nor on the evidence was any serious attempt made by the Government to obtain the approval of other Governments.  The company’s applications for temporary residential and work permits in The Gambia were refused.  The necessary radio frequencies were not allotted.  The dominant tone of the response accorded to Mr. Tosti is sufficiently conveyed by the third letter, which was from Mr. P.J. Jarjussey and was widely distributed within the bureaucracy by its author:-

 

“24th December 1992

 

WEST COAST AIR

 

18. I wish to acknowledge receipt of your letter dated 18th December, 1992 which was addressed to His Excellency the Vice President and copied to me, among others,  concerning the above noted subject in which you stated as follows: ‘Today the undersigned meeting the Permanent Secretary of the Ministry of Works, has been told that our designations are upheld pending clarification of our Company’s staff Immigration status.’ and to inform you that I neither had any such meeting with you to discuss this issue nor made the statement you ascribed to me to warrant the arbitrary assertion and claim you made in your letter under reference and cited above herein.  All that transpired was when you hurriedly called on me without notice, (and at one stage remained on your feet even though I had invited you to remain seated) I did inform you that your application for designation will be considered within the context and framework of the Government’s broad policies and regulations governing Civil Aviation and the status of companies and their staff, among other factors.

 

19. I would therefore like to take this opportunity to state categorically and most unequivocally, if for nothing else but at least for the records and for future reference, that you kept on abruptly calling on the Assistant Secretary at the Ministry without notice. When you attempted to see me in my office through him, his efforts proved futile as I was in the middle of previously scheduled meetings.  When I eventually received you, (again without notice) it was at great administrative cost to me because I had to cut - short another scheduled meeting to accommodate you.  My immediate advice to you was to request you to notify us of your visits in future so that you will not have to wait for long periods or go away without access to me, if, as it appeared to be the case, you were not satisfied with discussing with one of my collaborators who would have reported to me and make recommendations, on the basis of which a decision will be taken, either way.  This is why I emphasised to you during your brief appearance in my office - which you chose to call a meeting whose outcome incidentally was the one sentence cited in your letter under reference - that even though this is a public office and we are open to everybody and remain flexible, we also wish to conduct our work in a planned, orderly and co-ordinated manner.

 

PHODAY SAIKOUBA JARJUSSEY

PERMANENT SECRETARY

 

CC:  Secretary General & Head of The Civil Service

20. Chief Executive

21. National Investment Board

22. Permanent Secretary

23. Ministry of The Interior

24. Permanent Secretary

25. Vice President’s Office & Ministry of Defence

26. Solicitor General & Legal Secretary

27. Attorney General’s Chambers & Ministry of Justice

28. Director General of Customs & Excise

29. Department of Customs

30. Director of Immigration

31. Immigration Department

32. Ministry of The Interior

Commander

33. Gambia Gendarmerie

Commander

34. Gambia National Army

35. Director General

36. National Security Services

37. Office of The President

38. Inspector General of Police

39. Police Headquarters

Chairman

40. Board of Directors, Gambia Civil Aviation Authority

Chairman

41. Board of Directors, Gambia Airways

42. Managing Director

43. Gambia Airways

44. Director General

45. Gambia Civil Aviation Authority

46. Banjul International Airport”

 

47. It emerged from the defence evidence at the trial that on 9th December 1992, unbeknownst to the company, a meeting of officials had been held under the chairmanship of Mr. Jarjussey “to look into the circumstances surrounding the termination of West Coast Air’s Domestic Operation”.  The minutes, prepared by Mr. Jallow, record that the chairman told the meeting that from the onset he had objected to the development of the Basse airstrip.  As he regarded the company’s staff as staying in the country illegally, he recommended that its air services licences be suspended.  “He went on to warn the meeting to be wary of foreigners who come to this country to set up airline companies and acquire licences just to wind up after a short spell”.  The Director of Immigration was among those who lent support at the meeting to Mr. Jarjussey: he spoke of requiring the company, inter alia, to prove that it had invested more than $1 million in The Gambia.

 

48. What led to the sea change of attitude their Lordships are in no position to determine.  The trial judge appears to have gone as far as to describe the security reason as a hoax.  In the minutes of the December meeting there is a reference on the subject of security to a letter of 8th July 1992 on behalf of the Secretary-General; and at the trial one of the only two defence witnesses, Mr. B.A. Foon, spoke of a directive from the President’s Office.  No such letter or document was produced at the trial, however, nor was there any oral evidence, or even an affidavit or certificate, to give plausibility to the suggestion that security considerations truly arose. Indeed the other defence witness, Mr. Jallow, said that to him it appeared that no security was involved.

 

49. Eventually, by letter dated 7th June 1993 to the Director General of the Authority, with copies to the President of the Republic and the Minister of Works and Communications, West Coast Air gave notice that the total failure of its programme had been forced upon it, and of a claim to compensation.  In substance the letter terminated the relationship on the ground of repudiation by the defendants.  The writ followed on 17th November 1993, and shortly thereafter a statement of claim.  These documents deployed a somewhat indiscriminate range of charges against the defendants, including negligence, breach of contract and misrepresentation.  The Authority was named as the first defendant; the Attorney General, representing the Minister of Works and Communications, as second defendant.

 

50. The trial proceeded intermittently from 1st November 1994 until 6th December 1995.  The judge found a contractual relationship by conduct or estoppel; also negligent misstatement.  He awarded the plaintiff US$500,000 for what was described in the judgment as general damages but was intended to be a global estimate of the plaintiff’s losses by way principally of wasted expenditure.  One of the contentions for the defendants at the trial was that there had never been a contract.  In the Court of Appeal, however, the defendants abandoned that contention.  In additional grounds of appeal they apparently accepted that there was one “whole” contract, applying to both domestic and regional services, but alleged that the termination of the Banjul/Basse route was not termination of this whole contract.  The new contention was accepted by the Court of Appeal in a judgment delivered by Chomba P.  The court held that the aviation contract was not one entire indivisible contract but was divisible and severable.  They set aside the judge’s award and remitted the case to the Supreme Court so that the Master could assess which of the expenses claimed related to the domestic service.  Only for those were damages to be awarded.  On the appeal to their Lordships the same position was adopted by the respondents, the main arguments for them being that damages should be assessed for breach of the domestic part of the contract only.  It was also argued that the plaintiff was the author of its own losses or had failed to mitigate the damages.

 

51. A class of cases which quite commonly come before the courts in various forms consists of those in which parties join in some common venture or activity requiring cooperation but, after preliminary expenditure has reasonably been incurred by one party on the faith of the arrangements, the other becomes unwilling to proceed further.  Arrangements for Government concessions can be a species of this genus.  The disappointed party may have to accept the consequences of taking the risk, but the common law does offer several possible ways of fulfilling reasonable expectations by recognising a right to monetary compensation.  For instance it may be possible to see the dealings of the parties as giving rise to an implied contract or a duty of care in tort.  In the present case it becomes unnecessary to consider tort. The courts below found a contract without identifying with any precision how it was made or what were its terms. Their Lordships agree that the dealings can properly and realistically be analysed as creating a contract.  The letter of 20th January 1992, together with the surrounding circumstances, evidences a contract by words and conduct between the company and the Authority whereby, in return for an obligation by the company to take all reasonable steps to provide a regional and domestic air service, the Authority promised unreserved support.  The Authority’s promise was express.  It constituted acceptance of the kind of duty existing when parties agree to do something which cannot effectually be done without cooperation: see Mackay v. Dick (1881) 6 AppCas 251, 263 per Lord Blackburn.  In the circumstances the applications for and granting of the licences brought the Minister directly into the contractual relationship, which thus became a tripartite agreement to cooperate in all reasonable ways to establish the airline.

 

52. The description “entire contract” is not a particularly helpful one in this context.  Traditionally that label is applied to contracts where completion of one party’s performance is a condition precedent to the other party’s liability to pay.  That is not this case.  The contract was for both regional and domestic services, but the suggested severability or divisibility is unsupported by the evidence.  The company planned to provide these services with a single aircraft and as an integrated operation.  The expenditure claimed, extensive particulars of which were given in evidence, was not broken down as between domestic and regional services. Most of it could not be so broken down.  It was not put to Mr. Tosti in cross-examination that the regional services on their own would be economically feasible without a complementary domestic service, nor is there anything to suggest that this was at all likely.  From the first, services operated in combination were what was contemplated on both sides.  The severability argument, not raised at the trial or in the initial grounds of appeal, appears to have been an afterthought.  While appreciating that the Court of Appeal found it attractive, their Lordships are compelled to regard it as lacking an evidential foundation.

 

53. While various expressions are used in the authorities to denote the kind of conduct by a party which will justify the other party in treating a contract as repudiated for actual or anticipatory breach, the common principle is that, to amount to repudiation, a breach must go to the root of the contract: see Federal Commerce & Navigation Co. Ltd. v. Molena Alpha Inc. [1979] A.C. 757, 778-9 per Lord Wilberforce.  The test is normally the objective one of the effect of the conduct on a reasonable person in the shoes of the other contracting party; but, if the evidence shows that the conduct was inspired by the motive of putting an end to any relationship, the court will be readier to find the test satisfied.  In this case the curt letter of 13th July 1992 might well have gone to the root of the contract.  Without some explanation it could itself have destroyed the company’s faith in the willingness of the administration to continue to cooperate.  It proved to be but the prelude to a long course of frustrating official action and inaction.  By June 1993 the company was certainly abundantly justified in rescinding for repudiatory breach.

 

54. The argument that the company’s losses were caused or contributed to by its own culpable conduct is equally untenable.  There is no evidence of any significant default or failure to mitigate on the part of the company. On the contrary it acted reasonably in trying to preserve the contractual relationship as long as possible.

 

55. The company is therefore entitled to a full award of damages for reliance losses.  Mr. Causer, who argued the case for the respondents with clarity and candour, had to accept that the damages claimed for such losses were properly established by the sworn particulars.  There is no need for any further inquiry or assessment.

 

© CROWN COPYRIGHT as at the date of judgment.


© 1998 Crown Copyright


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