Blue Sky One Ltd & Ors v Blue Airways LLC & Ors [2009] EWCA Civ 749

Case No A3/2008/1193[2009] EWCA Civ 749
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN’S BENCH DIVISION
COMMERCIAL COURT
(MR JUSTICE FLAUX)
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate Thursday, 18 th June 2009
Before
LORD JUSTICE LONGMORELORD JUSTICE ETHERTONLORD JUSTICE PATTEN
Between
BLUE SKY ONE LTD & ORSApplicantsBLUE AIRWAYS LLC & ORSRespondents
(DAR Transcript ofWordWave International LimitedA Merrill Communications Company165 Fleet Street, London EC4A 2DYTel No: 020 7404 1400 Fax No: 020 7831 8838Official Shorthand Writers to the Court)
Mr H Malek QC and Ms G Morgan (instructed by Piper Smith Watton LLP) appeared for Applicants.Mr P Shepherd QC and Mr B Shah (instructed by Norton Rose LLP) appeared for Respondent.
Judgment
[1]This is an interlocutory appeal against a refusal by Flaux J to make an order for specific disclosure of certain documents in the trial which is due to begin in July. There is a pre-trial review tomorrow, and it has been represented to the court that it would be very convenient if the court could give an answer to the application for permission to appeal today, and that is what we will proceed to do.[2]The brief outline of the case is that the claimants claim that they leased three aircraft to a company called Blue Airways (the first defendant in the case), an airline registered in Armenia, but that at the end of the lease Blue Airways did not return the aircraft but instead transferred possession (purportedly by sale), to an entity called Mahan Air, an Iranian carrier operating flights from Tehran. The leases are written documents. The Bureau of Industry and Security of the US Department of Commerce have become interested in the transaction because the way in which the aircraft have ended up in Iran may, and indeed according to them does, constitute a breach of the US sanctions regime against Iran. It seems that there was a Side Letter Agreement that came into existence containing an option whereby Mahan Air would be able to acquire the aircraft under certain conditions. The claimants say the most important of those conditions was that that would go ahead only if and when United States sanctions were lifted.[3]The defence to the claim is that the leases were an elaborate sham designed to deceive the United States authorities and that the true agreement between the parties was an oral agreement made in early 2006 whereby the claimants and the third parties (who are ultimately owned by a UK company called Balli, “the Balli parties”) agreed to purchase the three aircraft from or through a United States bank, on behalf of Mahan and/or their funders, BSAFZE, a company which is incorporated in the United Arab Emirates. It is said that the Balli parties were to receive a management fee of US $1 million a year while they managed the aircraft on Mahan’s behalf and an option fee of US$1.25 million per aircraft. This agreement is said to have been made at or following a meeting on 17 January 2006 between persons acting for Mahan and a Mr Vahid Alaghband, the chairman of Balli Corporation Plc and a director of the claimant companies. On the face of it, that would appear a straight breach of the United States sanctions regime operating against Iran. But it is also said that no obligations accrued under the sham leases, which were designed to deceive the US authorities. Indeed it is said that no rental payments were in fact made. The defendants also say that they agreed to purchase three more aircraft in a similar way.[4]As I have said, the trial is fixed to begin very soon when the rights and wrongs of all this are going to be sorted out. Meanwhile, the United States Bureau of Industry and Security has been conducting its own investigation and on 17 March 2008 and subsequently have issued what are called Temporary Denial Orders against, among others, the Balli parties and Blue Airways and Mahan Air. This has had the effect of preventing the defendants from getting their hands on aircrafts 4, 5and 6. It may well be that that has precipitated the falling-out between the parties. It seems that the Balli parties made a number of submissions and representations to the Bureau trying to prevent the issue of the TDOs or at least trying to ameliorate their terms.[5]In those circumstances the defendants have sought disclosure of all statements made by the Balli parties to the Bureau on the basis that those statements will probably throw light on what, if anything, was actually agreed orally between the parties in 2006 and subsequently. Originally the defendants asked for all communications with the Bureau, which Flaux J (who has been dealing with this complex case in all its interlocutory stages) refused on 15 May 2009. Subsequently a more focused application was made for certain specific written communications. The judge refused that application on 2 June 2009 and it is that decision from which the defendants now seek permission to appeal.[6]The judge gave his reasons, naturally enough in the course of a case management conference, fairly shortly. He set out some of the facts and made reference to the pleadings, and then said this, at page 23 of the transcript of the proceedings of 2 June:
“It seems to me that there is no issue between the parties as to what it was that the Claimant said to BIS that actually has any bearing on the central issue in the case. The central issue in the case is, on the one hand, the Claimants say that they were the legal and beneficial owners of the aircraft, and that they are entitled to their delivery up pursuant to a whole raft of written leases and other agreements. On the other hand the Defendants say that those agreements, those written agreements, were all shams as part of an overall scheme to avoid US sanctions. And that the true relations between the parties were governed by an overarching oral agreement. It does not seem to me that what the claimants and Balli may have said or not said to the American authorities has any bearing on that issue. As I pointed out during the course of the argument… in the extremely unlikely eventuality that the Claimants had admitted the oral agreement to the American authorities, we would no doubt not be here today and matters would have proceeded in a very different manner. The American authorities would no doubt have regarded that as very serious indeed, and that would have clearly emerged from the TDO or other documentation emerging from the BIS. It is fanciful to suppose that what the Claimants told the American authorities is going to assist the Defendants in any way in advancing their case about the existence or otherwise of the oral agreement. It seems to me that this application has no greater merit than it did on the last occasion and for those reasons I propose to dismiss it.”
On the face of it, it seems to me that not merely is that an order which the judge in his discretion was fully entitled to make but it would also appear to be correct. What someone says or does not say in 2007 about an agreement he made in early 2006 is inevitably somewhat marginal compared to the oral evidence of the parties about what they did in fact agree, which is what is bound to take up most of the trial. That is surely all the more so if what is said in 2007 is said with a view to persuading a government agency such as the Bureau to abstain from interfering with the parties’ commercial arrangements. It would, moreover, be surprising if the claimants and the Balli parties had admitted or asserted the supposed oral agreements when, as the judge pointed out, that would amount to an admission that they were busy trying to contravene the sanctions regime in place in relation to Iran. What is more, when one actually looks at the Temporary Denial Orders, and Mr Malek this morning has taken us through them, it is fairly clear that what originally the Balli directors were saying (as indeed is recorded in the defendant’s defence) was that:
“they were in the business of leasing aircraft to an American lessee whose operations had no connection with Iran or Mahan.”
The defendant’s case is that that was a dishonest statement but that all depends on whether their contention about the oral 2006 agreement is correct. The existence of such a representation does not show that the assertion of an oral agreement is or is not correct and carries any enquiry very little further. The fact, if it be a fact, that a year later the claimants were forced to accept in front of the Bureau that there was an Iran connection in the form of the Side Letter which I have mentioned is a matter which is apparent on the face of the documents, and the defendants can make of it what they will, as no doubt they will.[7]What Mr Malek has submitted in essence is this: that it is inevitable that any trial will focus very largely on what was said to the Bureau by the claimants, because whoever represents the defendants will want to show that what was said to the Bureau, as the Bureau seems to have thought, was in fact false, and it will then be said:
“If the claimants were making false statements to the Bureau, they likewise are giving false evidence to the court”
. Mr Malek also says that really it is no different from a case where, when there is an assertion of an oral agreement, the person who is alleged to have made that oral agreement a short time later says to his brother or other business associate something about the agreement. Mr Malek says:
“Surely that must throw a considerable light on whether an agreement of this sort was made or not.”
I have to say that, if the disclosure was ordered, there would to my mind, and this may well be something that the judge himself had in mind, be a great risk of the trial being taken up to a large degree by allegations and counter-allegations of what was said or what was not said or what the statement that was made meant, in a way that is most unlikely to assist the trial judge to come to a conclusion on this case, when he will have the oral evidence of the claimants and the oral evidence of the defendants about what was supposedly agreed in 2006.[8]It seems to me that the decision made by Flaux J in effect was a case management decision in the course of his managing the case. There are certainly no grounds for saying he has ignored any principle of law about disclosure. I am very conscious that he must know far more about the case than this court can ever do and that it seems to me is a fair consideration to take into account. As is well known, this court is most reluctant to interfere with case management decisions made by a judge who has been case managing the case for a considerable time.[9]In my view this application for permission to appeal is really a hopeless application and should be refused.[10]I agree.[11]I also agree.

Order

Application refused