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Supreme Court of the ACT Decisions |
COURT
IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORYCATCHWORDS
Debt - claim for money had and received - questions of fact - no new principle involved.HEARING
CANBERRA Counsel for Plaintiff: Mr Sully, QC
Mr NashSolicitor for Plaintiff Messrs Abbott Tout Russell
Kennedy - Mr J BuxtonCounsel for Defendant Mr Stanley, QC
Mr WilliamsSolicitor for Defendant Australian Government
Solicitor - Mr J Campbell
ORDER
That the plaintiff's claim be dismissed.DECISION
By its amended Statement of Claim the plaintiff claimed as money had and received by the defendant to its use the sum of $US985,000.00, said to be moneys paid by the plaintiff to the defendant for a consideration which had wholly failed. It also claimed interest pursuant to section 53A of the Australian Capital Territory Supreme Court Act 1933.2. It first alleged that it was a corporation incorporated pursuant to the laws of the Republic of Colombia entitled to sue in its corporate name.
3. Secondly it alleged that on or about 1 February 1983 by an agreement partly written and partly oral the defendant agreed to sell and it agreed to buy two Hercules AC 130 aircraft, payment for which was to be made by the plaintiff in the currency of the United States of America.
4. Next it alleged that pursuant to the terms of the said agreement it paid to the defendant a total of $US985,000.00 as part payment for the said aircraft but that the plaintiff had not delivered any of the said aircraft to the plaintiff.
5. It alleged further that in the premises the consideration for the payment of the said sum had wholly failed and that the defendant had received that sum for and to the use of the plaintiff.
6. By its defence the defendant denied that the plaintiff had paid it the said sum or any moneys at all and denied further that it had received the said sum or any moneys at all for or to the use of the plaintiff.
7. The defendant did not admit that the plaintiff was duly incorporated or entitled to sue in its corporate name.
8. The defendant denied the alleged agreement or the payment to it by the plaintiff of any money. It admitted that it did not deliver any of the aircraft to the plaintiff but denied that it was under any obligation to do so.
9. It then pleaded that if, which was denied, it had received the sum claimed
or any sum of money from the plaintiff then such moneys
as were received
were:-
(a) not received to the use of the plaintiff;10. It is convenient to set out the next seven paragraphs of the Defence in its final form in full:-
(b) expended at the direction of and with the
consent of the plaintiff so that the
plaintiff was thereby estopped from claiming
the said sum or any sum so expended from the
defendant; and
(c) not a payment constituting the whole or any
part of the purchase price of the aircraft.
"9. At no relevant stage did Ford and Vlahos,11. Particulars of the amendments set out in paragraphs 9 to 15 were sought. As a result oral particulars were given. Those in respect of paragraphs 9 to 13 may be summarised as follows:-
Attorneys at Law of San Francisco, California
have authority from the Defendant to:
(a) enter into an agreement to sell as alleged
in paragraph 2 of the Particulars in the
Amended Statement of Claim;
(b) expend monies of or due to the Defendant in
respect of "Get Ready" preparation, ferry
flight delivery, ground and flight training,
painting, overhaul or maintenance of the
said aircraft (hereinafter referred to as
"the preparations").
10. To the extent to which Ford and Vlahos entered
into the said agreement to sell or expended
monies of the (Defendant) (clearly this should
read "Plaintiff") on the preparations it acted
beyond the scope of its authority from the Defendant.
11. In or about the month of May 1983 the Plaintiff
instructed John J. Ford III, a partner of Ford
and Vlahos, to carry out the preparations at its
risk, notwithstanding that end-user approval had
not been received from the United States.
12. The said Ford had the preparations carried out,
paying for the same with monies that had been
deposited by the Plaintiff in an account entitled
"Australian C130A Escrow Account" at Barclays
Bank California together with any other monies
provided by the Plaintiff to him between the
months of July 1983 and January 1984.
13. In having the preparations carried out and in
paying for the costs thereof the said Ford was
acting on behalf of and as agent for the Plaintiff.
14. Alternatively to paragraphs 9 to 13 hereof, if
Ford and Vlahos or Ford was an agent of the
Defendant for the purpose of receiving and
expending monies in respect of the aircraft,
it/he incurred the costs of the preparation in
reliance upon the assurance of the Plaintiff that
it was at its risk in the event that end-user
approval was not received.
15. By reason of the foregoing the Plaintiff is
estopped from claiming of the Defendant or its
agent the costs so incurred."
1. As to paragraph 9:-12. Particulars of paragraphs 14 and 15 were sought. The defendant said in effect that the estoppel pleaded in paragraph 15 was based upon the facts pleaded and particularised in paragraph 14.
The paragraph was to be read as though the word
"relevant" was not included therein;
2. As to paragraph 10 :-
The authority referred to was alleged to be that
contained in a document described as "Seller's
Escrow Instruction (Sale and Delivery
Aircraft)" on 15 June 1981.
3. As to paragraph 11:-
The plaintiff instructed John J Ford III, a
partner in the firm of Ford & Vlahos.
The defendant alleged that on or about
23 May 1983 the plaintiff, by Mr Battiston, and
in the presence of Mr Herrera, and, so it was
believed, at the Clipper Club at Los Angeles
Airport gave instructions in accordance with the
contents of paragraph 11 of the Defence. That
instruction in turn followed a number of
telephone conversations from time to time in the
preceding weeks and probably months between
Mr Battiston and Mr Ford.
4. As to paragraph 12:-
The preparations referred to were "get ready"
preparations, ferry flight delivery, the ground
training of the crew, the flight training of the
crew, painting, overhaul and any other
maintenance required on the aircraft.
The defendant was unable to say what was the cost
of the preparations or in what manner payment for
those preparations was effected.
13. It was not in dispute that $US600,000.00 had been deposited to the credit of the escrow account.
14. The parties agreed that in essence the case was one where the plaintiff alleged that, under an uncompleted agreement, it paid to the agent of the defendant the sum of $US985,000.00, the consideration for that payment failed wholly and it was therefore money received by the defendant to the use of the plaintiff.
15. The defendant, on the other hand, denied those allegations and said in addition that the money, if paid, was expended by the plaintiff by its agent.
16. I am satisfied that the plaintiff was duly incorporated and entitled to sue in its corporate name. I am satisfied also that it was entitled by virtue of appropriate permits under Colombian law to engage in an enterprise connected with air transport in Colombia.
17. On 20 November 1980 one P W Hocking, acting as the Canberra representative of John J Ford III (Mr Ford) and using the stationery of Messrs Ford and Vlahos, wrote to the then Minister for Administrative Services and Minister assisting the Minister for Defence (Mr Newman), to seek, to put the matter briefly, the engagement of Mr Ford as a broker to effect the sale of a number of aircraft including the two in question.
18. Mr Ford forwarded a telex to the First Assistant Secretary of the
Purchasing Division, Department of Administrative Services
on 10 March 1981.
Included in that telex were the following paragraphs:-
"4. I confirm that our fees - covering the19. Again using Ford and Vlahos stationery, Mr Hocking, on 3 April 1981, advised, inter alia, that Mr Ford was then in South America. On 3 April 1981 also, Mr Ford formally offered the services of his firm seeking appointment as the Commonwealth's sole agent or representative for the marketing of the aircraft and the A-Unique spares. Ford and Vlahos agreed that, if appointed sole agent, they would, as they said -
entire project - will be to the account of the
purchaser, fixed by us as a part of the total
negotiation. That no expense will be incurred by
the Commonwealth.
5. I confirm the need for two categories of
spares:
A. Ferry flight back-up spares (to enable the
aircraft to safely depart Australia and be
flown to their end destination without mishap),
B. A-unique support spares to maintain the
aircraft in service thereafter."
"- Arrange the 'get ready' of the aircraft,20. Mr Newman approved the proposal to appoint Messrs Ford and Vlahos as sole representatives of the Commonwealth in relation to the marketing of the aircraft.
pre-flight testing, appropriate ferry flight
authorisations and certification of
airworthiness, export permits and subsequent
ferry of the aircraft to the end users. (In
this regard it is imperative that no
intermediaries are accepted as delivery
points. The end user must be the point of
first delivery from the Commonwealth.)
- Ensure that the end user buyer pays all the
costs of the 'get ready' pre-flight testing
and ferrying as part of the transaction. (In
other words, the Commonwealth shall have no
cost or concern with this aspect of the disposal.)"
21. On 13 May 1981 Mr Newman signed an instrument in the following terms:-
"The Commonwealth of Australia has appointed Ford22. The next step of importance was the execution of the "Seller's Escrow Instructions, (Sale and Delivery Aircraft)" on 15 June 1981.
and Vlahos, Attorneys-at-law of San Francisco
California as sole agents to sell on behalf of
the Commonwealth of Australia 10 C130A Hercules
Aircraft presently in Australia together with
associated spares.
This will involve arranging for the inspection of
the aircraft and spares in Australia and
subsequently the implementation of escrow
procedures approved by the Commonwealth."
23. There were in fact two such sets of instructions, one relating to each of
the aircraft in question, but they were in identical
terms save that serial
numbers and identification numbers of the aircraft differed. It is convenient
to set out the text of one
of those documents in full.
"To: FORD & VLAHOS24. At the foot of each document there appeared in handwriting the words,
Attorneys at Law
Alcoa Building, Suite 1313
One Maritime Plaza
San Francisco, California 94111
Attention John J. Ford, III
ENCLOSED please find Aircraft Bill of Sale to the
aircraft herein described, which you may complete
and deliver to any End-User approved by United
States of America Department of State when you
obtain payment of the sum of Australia
$1,000,000.00 certified funds, payable to the
Commonwealth of Australia deposited with Barclays
Bank of California covering the following
aircraft:
Make LOCKHEED HERCULES
Model C130A
LAC Serial Number 3216
Australian I.D. Number: A97-216
Subject to:
1. Receipt by you of the Australian Restricted
Goods - Export Permit, applicable to the
described aircraft;
2. Inspections, get ready, and all preparations
for ferry flight, including any necessary
test flights, and ferry flight authorization
from Australia to the country of destination
and delivery to the designated End-User to
be done by you;
3. Approval of End-User from the Department of
State of the United States of America;
4. Other applicable permits or authorizations
from the Commonwealth of Australia or
Departments thereof.
GENERAL PROVISIONS
1. Filing and recordation of any instruments
delivered through this escrow is authorized
in accordance with instructions;
2. Time is of the essence in this escrow;
3. Any amendment or supplement to these Escrow
Instructions must be in writing;
4. Inspection of aircraft to be subject to
receipt by you of the sum of at least
$A200,000.00 and notification to
Commonwealth of name of proposed End-User
and end use and details of persons forming
inspection team.
5. Costs, fees or other compensation to any
agents shall be to the account of the End-User;
6. Escrow will cease on the 31st December 1981;
7. Funds to be transferred to the Commonwealth
upon delivery of aircraft Bill of Sale.
SELLER: COMMONWEALTH OF AUSTRALIA
DEPARTMENT OF ADMINISTRATIVE SERVICES
BY: Signature indecipherable"
"Received, approved and accepted 15 June 198125. In a report made to the First Assistant Secretary of the Purchasing Division, Department of Administrative Services (Mr Low) on 18 December 1981, Ford and Vlahos advised that Mr Ford had pursued the most promising prospects with personal visits to Bogota, Colombia, with numerous visits to Washington and New York and five visits to Australia. Total expenditure to market the aircraft and spares then stood, the report said, in excess of $US300,000.00. The report added that,
(Sgd) John J Ford III"
"Our International Operations Manager,26. On 11 January 1982 the Sole Agency Agreement was extended to the end of April 1982. On 22 December 1982, Mr Low noted that he had advised Mr Ford that his authority to act as agent had not been revoked although it had been under review. Mr Low told Mr Ford that there would be no withdrawal of his authority without prior advice to him and that he should proceed with the negotiations he had on hand on the basis of full authority.
Captain Kenneth C. Oliver, who is oversighting
this facet of the programme, has been stationed
at Laverton full-time for the past six months."
27. The problem that bedevilled the whole transaction was that the United States of America, which had originally sold the aircraft to Australia, was not prepared to agree to a sale by Australia of the aircraft unless it approved the eventual purchaser, known in the documentation as the "end-user".
28. Mr Battiston gave evidence that he began to work for the plaintiff on 1 January 1983 as its Director of Operations, continuing in that position for about 13 months under the direction of the company's Manager, Luis Carlos Herrera. He then worked for a subsiduary of the plaintiff and subsequently returned to its employ in November 1986 as General Manager, staying in that position for about two years until November 1988. He gave evidence of a meeting with Mr Ford in January 1983 when Mr Ford showed him the appointment as agent signed by Mr Newman on 23 February 1982. Present at the meeting, which took place in Mr Ford's office, were Mr Ford, his wife, a Mr Mauricio de Castro and Mr Battiston. Mr Battiston said that Mr Ford said that with each aircraft he would sell one tenth of the spare parts because there were ten planes to sell. The price he nominated for each plane and the parts which went with it was $US2,800,000.00. Mr Battiston said to Mr Ford that he wanted to see the planes and was told that so that he might do so a deposit of $300,000.00 in respect of each plane had to be paid. That sum was to be deposited in an escrow account and was to form part of the payment for the aircraft. If the aircraft were not accepted it would be reimbursed. Mr Battiston told Mr Ford that it would be easier to send the money direct to Australia than to send it to the United States and then to Australia but Mr Ford produced a document to indicate that he was in a position to transfer ownership immediately to the end user or final owner subject to approval by the US State Department.
29. Mr Battiston gave evidence that he then reported to the plaintiff and was instructed to speak to Mr Ford again to tell him that the plaintiff was ready to deposit the money in an escrow account but that he was to negotiate a lower price for the aircraft.
30. There followed another meeting with Mr and Mrs Ford, Mr de Castro and Mr Battiston. After some negotiation it was agreed that the plaintiff would purchase both aircraft and spare parts for $US3,375,000.00. A deposit of $300,000.00 was subsequently paid into the escrow account.
31. Mr Herrera, Mr Battiston and members of their families travelled to Australia where they inspected the aircraft at Laverton. They spent a day inspecting the aircraft and the relevant documentation. The party then went to Sydney where they inspected the spare parts which were located in that city. Before the inspection, Mr Ford introduced Mr Hocking to Mr Battiston as a government officer, so at least Mr Battiston said, although I doubt this to have been the case.
32. The plaintiff then, through Mr Battiston and Mr Herrera, entered into a
written agreement dated 1 February 1983. I set out the
text of the agreement
in full.
"AGREEMENT33. It is probable that an undated purchase order was also signed by Messrs Herrera and Battiston and accepted by Mr Ford on 1 February 1983. Its text was as follows:-
TO PURCHASE
AIRCRAFT AND SPARE PARTS
AND FOR
"GET READY", FERRY, AND TRAINING
DATED 1 FEBRUARY 1983
WHEREAS, on 1 February 1983, AVIACO LTD., by and
through its representatives, Frank Battiston and
Luis Carlos Herrera completed the inspection of ten
(10) C-130A Lockheed Hercules aircraft and spare parts
in Melbourne and Sydney Australia and;
WHEREAS, AVIACO LTD. has determined to purchase two
(2) of said aircraft and is therefore entitled to
first selection of 20% of the spare parts associated
with said aircraft.
It is hereby agreed as follows:
1. Purchase of two aircraft and spare parts
described herein having been approved,
AVIACO LTD. hereby deposits with Barclays
Bank of California, 3rd and Market Street,
San Francisco, California the sum of Three
Hundred Thousand Dollars (US$300,000.00) on
account of aircraft Serial No. 3212, to be
applied as a deposit on the purchase and
delivery of said aircraft and the spare
parts associated therewith.
2. Buyer shall deposit the additional sum of
U.S. Three Hundred Thousand Dollars (U.S.
$300,000.00) to secure delivery of the
second aircraft, Serial No. 3216 and spare
parts associated therewith.
3. Buyer shall obtain Colombian Authorization
to Import and U.S. End Use Certificate for
said aircraft and spare parts from
appropriate Colombian authorities, whereupon
Buyer shall transmit to Barclays Bank,
Singapore, duly authenticated and approved
Bank Letters of Credit, guaranteed by the
Central Bank of Colombia, in the amount of
U.S. One Million Dollars (U.S.
$1,000,000.00) for each aircrraft (sic) and
associated spare parts the subject of this
agreement.
Buyer shall further deposit the sum of U.S.
Three Hundred Eighty Seven Thousand Dollars
(U.S. $387,500.00 (sic)) for each aircraft
and associated spare parts with such
Barclays Bank as is designated so as to
constitute a total purchase price of U.S.
Three Million Three Hundred Seventy Five
Thousand Dollars (U.S. $3,375,000.00) for
the two aircraft described herein, together
with twenty percent (20%) of the entire
spares parts inventory, of which Buyer shall
be entitled to first selection.
4. Seller shall make arrangements, as a part of
the purchase price for all "Get Ready"
preparation of the aircraft on-site at
Australian RAAF Base Laverton, Melbourne,
Australia so that a safe ferry flight
delivery may be made to the Republic of
Colombia or an overhaul facility as
designated by Buyer.
5. Seller shall make arrangements, as a part of
the purchase price for the required ferry
flight of both aircraft from Australian RAAF
Base Laverton, Melbourne, Australia to an
overhaul facility designated by Buyer for
the purpose of required I.R.A.N., overhaul,
painting, polishing or maintenance of both
aircraft as further directed by Buyer.
All overflight and en-route clearances
required shall be obtained by the ferry
flight designee. The buyer will assist in
obtaining any and all en-route or refueling
(sic) clearances as required.
The Buyer will pay the approved cost of said
required I.R.A.N., overhaul or maintenance
in accordance with contract terms to be
negotiated by the Seller with said overhaul
facility. Costs of transportation, lodging
and accommodations of Seller incurred in
said negotiations shall be paid by Buyer.
6. Following I.R.A.N., overhaul or maintenance,
seller shall make arrangements, as part of
the purchase price, with the ferry flight
designee for further ferry flight delivery
of each of the two (2) aircraft to the
Republic of Colombia. All overflight and
en-route clearances required will be
obtained by the ferry flight designee.
Buyer will assist in obtaining any and all
en-route or refueling (sic) clearances as
required.
All costs of "Get Ready", ferry flight,
ground training and flight training shall be
discharged by Seller from the total purchase
price as set forth herein.
7. Seller shall make arrangements, as a part of
the total purchase price, for ground
training and flight training, on-site at the
overhaul facility at Air Asia, Taiwan or
such other location as is designated by the
parties. Cost of transportation and
accommodations of Buyers personnel shall be
paid by Buyer.
The designated training entity, employing
former Australian C-130A Flight Captain,
Flight Engineer and Systems Specialist shall
be paid from the total purchase price as
provided herein. The Syllabus formerly used
by the Royal Australian Air Force (RAAF)
shall be the basis for such training."
CONDITIONS PRECEDENT TO BE FULFILLED BY APPROPRIATE
GOVERNMENTAL AUTHORITIES
1. Deposit in escrow of duly completed
Certificates of Export from the Commonwealth
of Australia in favor of AVIACO LTD., of the
Republic of Colombia to each of the two
aircraft described, together with associated
spare parts.
2. Deposit in escrow of United States of
America, Department of State, approval of
the Republic of Colombia as Foreign
Government and End User, said approval to be
obtained directly by the Commonwealth of
Australia following payment in escrow by Buyer.
3. Ferry Flight Authorization from the Republic
of Colombia, together with Waiver by
Commonwealth of Australia Airworthiness
requirements for the ferry flight required
for delivery of the aircraft to the overhaul
facility and subsequent delivery to the
Republic of Colombia.
4. All other authorizations and permits
required from the Republic of Colombia,
Commonwealth of Australia, the United States
of America, or any Department thereof of
either of the countries necessary to export
and the ferry flight of the aircraft to the
Republic of Colombia.
5. Seller, on behalf of Buyer, is authorized
and directed to make application for, and to
proceed with all steps necessary to obtain
said authorizations and approvals from each
of the designated governmental authorities
and to disburse funds so that no additional
expense is chargeable to the Buyer, other
than as provided herein.
AVIACO LTD., BOGOTA, COLOMBIA
BY: (Sgd) Frank Battiston
(FRANK BATTISTON
BY: (Sgd) Luis Carlos Herrera
(LUIS CARLOS HERRERA
FORD & VLAHOS
Sole Agent for Sale of
Lockheed C-130A Aircraft and
Spare Parts For the
Commonwealth of Australia.
BY: (Sgd) John J. Ford III
(JOHN J. FORD, III"
"AVIACO LTD.34. During the course of continuing negotiations involving the possibility of a purchase of a third plane, Mr Ford told Mr Battiston that Colombian Customs documentation should be dealt with as quickly as possible so that it might be sent to the United States State Department.
P.O. BOX 151139 AEROPUERTO EL DORADO
TRANSVERSAL 44 118-82
BOGOTA, COLOMBIA
PURCHASE ORDER
AIRCRAFT AND SPARE PART
AVIACO LTD., Foreign Consignee for the Republic
of Colombia Air Force Reserve herby orders the
following:
1 Lockheed C-130A Hercules Aircraft,
Serial No. 3212 with 4 Allison Engines
and 4 Aero Products Propellors attached.
U.S. $1,000,000.00
1 Lockheed C-130A Hercules Aircraft,
Serial No. 3216 with 4 Allison Engines
and 4 Aero Products Propellors attached.
U.S. $1,000,000.00
including spare parts constituting 20% of
inventory.
(Originally, the Commonwealth sought to sell ten
aircraft.)
AVIACO LTD.
Transversal 44 No. 118-82
Bogota, Colombia
BY: (Sgd) Frank Battiston
(FRANK BATTISTON
BY: (Sgd) Luis Carlos Herrera
(LUIS CARLOS HERRERA
ACCEPTANCE
The purchase order set forth above is hereby
accepted subject to U.S. End User Approval and
Australian Export Permit.
FORD AND VLAHOS
BY: (Sgd) John J. Ford III
JOHN J. FORD III
35. Mr Battiston then said that after the contract was signed, Mr Ford told
Mr Herrera in his presence that he (Mr Herrera) had to
give him the money that
was in the escrow account. He was asked why this should be necessary since it
had been agreed that the planes
would be paid for when the end user
certificate had been issued. Mr Ford replied, Mr Battiston said, that he had
informed the Government
that he had that money in the escrow account and that
he had to hand it over to the Government. Mr Herrera and Mr Battiston told
Mr
Ford that the money was in the escrow account and he replied,
"Yes, but it cannot be withdrawn unless you giveMr Ford said,
the order."
"Fine, but the Government wants to have parts ofMr Battiston and Mr Herrera then told him that they had already performed an act of good faith in depositing the money in the escrow account to inspect the planes but Mr Ford insisted and they finally signed a cheque for $100,000.00 because the government was going to start the "get ready procedure" on the planes. Mr Ford brought a partially completed cheque, which he had already signed, for the amount and asked Mr Battiston and Mr Herrera to sign it. Mr Ford then gave them a receipt (Exhibit "DDD") which was in the following terms:-
the money as an act of good faith".
"Receipt for $100,000.00The receipt was signed by Mr Ford and was on his headed note paper.
Advance - C-130A Program
Received Withdrawl (sic) Order dated
7 February 1983 executed by Frank Battiston and
Luis Carlos Herrera drawn on Barclays Bank C-130A
Hercules Australian Escrow Account in the amount
of U.S. $100,000.00 for costs, fees, expenses
allocable to C-130A Get Ready program."
36. Mr Ford then said,
"This is to show the Government's good faith inMr Ford also said, according to Mr Battiston's evidence, that if the planes did not go to Colombia, the $100,000.00, as well as the money which was in the bank, would be refunded.
the transaction and because they were going to
start in the preparation of the planes."
37. Mr Battiston also gave evidence that he had a discussion with Mr Ford
concerning the refundability of the $300,000.00 which he
had deposited to the
escrow account. He said that Ford told them that if the plaintiff did not go
ahead with the transaction, the
money would be refunded. He then said,
"He told us that if some of the conditions were38. On 28 March 1983 Mr Low reported that get-ready work on aircraft number 3212 was well advanced while the second aircraft, number 3216, could soon be brought up to the necessary standard. For the purpose of initial ferry flights, arrangements, he said, had been made with former flying officers and flight engineers with RAAF experience to ferry the aircraft from Laverton, Victoria to Bogota, Colombia. As a first step, the first aircraft was to be flown to Tainan Air Base where further maintenance work, corrosion control and repainting were to be carried out by a company called Air Asia Pty Ltd. The second aircraft was to follow shortly thereafter for similar servicing. After that servicing had been completed both aircraft were to fly via Guam/Honolulu/San Francisco/Dallas to Colombia. At that time the Colombian Government had provided, so Mr Low said, an import licence with a Governmental undertaking that no de-registration, re-export, sale or other disposition of the aircraft would be permitted without prior U.S. approval. The aircraft were to be required mainly to perform governmental contracts in Colombia and in time of need would be used by the Colombia Air Force Reserve.
not met, for example, the end user certificate
from the US Government, because it was not up to
us to approve that, then the money would be refunded."
39. In a memorandum of a discussion with Mr Hocking which took place on 2 May
1983 it was said,
"In amplification of these arrangements, the40. On 20 May 1983, Mr Low wrote to the Secretary of the Department of Foreign Affairs and said, inter alia,
$600,000 deposit is to be subsumed in the overall
purchase price but another substantial sum
($0.5m) has been put up by the company from which
Ford has been authorised to draw up to $100,000
to assist in the "get ready" work in Australia."
"As evidence of its bona fides, Aviaco has41. On 31 May 1983 Messrs Stephen Jaques Stone James, acting on behalf of Barclays Group in Australia, advised that their client had advised of the receipt in Sydney of AUS$500,000 from Barclays Bank of California in connection with the proposal to ferry immediately one aircraft to an agreed overhaul facility at the request of the purchaser, Aviaco Ltda. The letter said that the funds were being held in the Ford and Vlahos account.
already lodged in escrow the full purchase price
for the two aircraft and has arranged for
training of its engine maintenance personnel at
National Airmotive Co., California. Pilot
training is being undertaken in Singapore on the
C130 Simulator operated by the Singapore Air
Force. Aircraft overhauls are planned to be
conducted at Air Asia Pty Ltd, Taiwan. Ferry
flights from Australia to Colombia are to be
carried out by authorised Australian flight
crews. This will ensure that control of the
aircraft does not pass to Aviaco until after the
aircraft have reached Colombia."
42. The sole agency was further extended to 30 June 1983 on 17 March 1983. By 16 March 1983 a deposit of $US300,000.00 had been lodged in respect of each of the two aircraft.
43. Mr Battiston gave further evidence that in April or May 1983, about two
or three months after the authority to withdraw the sum
of $100,000.00 had
been signed, Ford advised the plaintiff that the end user had been approved
and began to ask that he be paid a
further $500,000.00. Ford told Battiston
and Herrera that so that the planes might be released, he needed at least the
money that
was in the bank until the letters of credit and the remaining
amounts of money arrived. Earlier, by letter dated 10 March 1983,
Ford had
written to Herrera as follows:-
"Request is hereby made that you verify44. The Directors of the plaintiff authorised the handing over of the $500,000.00 to Ford. The cheque bore a notation "Transfer of A/C (aircraft) 130A to Tainan". The procedure adopted in respect of the cheque for that amount was the same as that which had earlier been adopted in respect of the payment of the sum of $100,000.00. Mr Battiston was clearly reluctant to sign the cheque. He said that he reminded Ford that as the planes had not reached Colombia the money should be refunded as had been agreed to in writing. I rather think he meant that he reminded Ford that if the planes did not reach Colombia the money should be refunded. Ford replied, he said,
availability of funds to Aviaco of Bogota,
Colombia in the amount of U.S. Two Million Two
Hundred Thousand Dollars ($2,200,000.00) for the
purpose of purchase of Two (2) C-130A Hercules
aircraft and associated spare parts from the
Government of Australia. This verification is
required so that United States of America
End-User Approval may be obtained. In the event
this condition of End-User Approval is not
fulfilled, there will be no necessity of funding
against this verification of funds and any funds
including the U.S. Six Hundred Thousand Dollars
($600,000.00) heretofore advanced by Banco
Ganadero S.A. shall be returned."
"Yes, we will refund it. Rest at ease."45. Mr Battiston also gave evidence that in March or April 1983 he, Mr Herrera and Mr Bravo made several calls to Ford asking him to send a letter or certificate of the end-user approval. Ford replied that the certificate would be sent by the US Government to the Australian Government in Canberra. Battiston insisted that Ford should send a letter concerning the end-user approval. In the event, Ford eventually wrote a letter dated 19 August 1983. I set out its text:-
"August 19, 198346. Finally, in his evidence in chief, Mr Battiston said that money could not be drawn from the account at Barclays Bank in San Francisco without his signature until he had seen the planes.
AVIACO LTDA
c/- 3421 South West 124 Court
Miami, Florida 33175
ATTN Frank Battiston, Operations Manager
RE Status Report - End User Certificate
As we have previously advised you, the U.S.
Department of State gave its verbal approval in
substance to the AVIACO C-130A purchase some time
ago. It has taken more time to formalize this
approval because of several unforesen (sic)
circumstances. U.S. State Department personnel
were transferred in July and August.
Mr Craig Murphy, the desk officer originally
responsible for the file, was transferred to a
different department and a new person was
assigned to this transaction. Additionally,
since the aircraft are going to the U.S.A. for
stripping, painting, inspection and maintenance,
it created the necessity for double approval and
licenses, from two separate departments, to
process the importation into the U.S.A. and the
subsequent transfer from the U.S.A. to Colombia.
The U.S. Department of State has requested
present verification by a representative of the
Government of Colombia giving assurance that any
subsequent sale of the C130A Hercules aircraft
will not be approved by the Government of
Colombia without first seeking formal U.S. approval.
All other necessary approvals have been obtined
(sic). We are advised directly by the
responsible staff officer at the Department of
State, Steve Delp, that, upon receipt of the
assurance by the Colombian Government,
transmitted through the U.S. Embassy in Bogota,
that the matter should be concluded.
We have kept in constant contact with Mr. Delp
and will continue to do so until final approval
is transmitted and the first aircraft can be
ferried to Dothan, Alabama.
Your patience, cooperation, and continued
persistence in complying with each succeeding
requirement of each of the three governments
involved is deeply appreciated. Without your
coopration, this office would have been tempted
to surrender to the bureaucrats long ago. With
continued persistence we will comply with all of
the requirements and conclude this transaction
expeditiously.
Very truly yours,
(Sgd) John J. Ford III
John J. Ford, III"
47. A telex message dated 25 September 1983 sent by Mr Hocking as Australian
representative of Ford and Vlahos said, inter alia:-
"Ford is advised that the Australian Government48. On 4 October 1983, the agency appointment was extended to 31 January 1984.
has not requested formal approval to sell the
aircraft to Aviaco and allow transhipment of the
aircraft for required maintenance...Failure to
(lodge a formal request for approval of the
Aviaco sales with the U.S. State Department) will
result in Aviaco's withdrawal, the return of
their deposited purchase funds and the loss of
3 aircraft sales."
49. By 12 October 1983 it appeared that Ford had advised through Hocking that the Colombian sale was then in jeopardy due to the imminent expiry of the Colombian Government permit to import aircraft of that type. The United States State Department had not yet determined its position on the proposal. As appears from a cable, Exhibit "VV", the Australian Government had been told that the aircraft had to be relocated to Alabama before 28 October 1983 to enable their overhaul to be completed in time for them to be ferried to Colombia before the end of November 1983.
50. Mr Hocking advised Mr Low on 26 October 1983 that aircraft 3212 was to depart Laverton on Friday 28 October for Richmond whence it would leave Australia to arrive in Alabama on 1 November 1983.
51. By letter dated 28 November 1983, Mr Low was advised by the Manager of Barclays Australia (Finance) Limited, Canberra that Barclays Bank of California, San Francisco had advised that they had in hand a Letter of Credit confirmed by the Union Bank Los Angeles, California for an amount of US $2,120,000.00 payable upon presentation of a Bill of Sale and Acceptance Certificate in connection with the sale of two used C-130A Hercules Aircraft to "Aviaco Ltd" Colombia.
52. On 30 November 1983 the American authorities advised as follows:-
"As you know, the circumstances of this proposed53. Of critical importance to the case which the plaintiff seeks to make are the events said to have taken place at a meeting held on 23 May 1983 at the Clipper Club at the Los Angeles International Airport. Mr Battiston gave evidence in cross-examination about the events at that meeting. He did not identify the date on which it was held but I am satisfied that in fact it did take place on 23 May 1983. It was put to him that at that meeting Mr Ford indicated to him that if the money were released from the escrow account it could be used to get one plane ready so that it might be transported from Australia to America where it would be held until end-user approval were given when it could then be transferred to Colombia. Mr Battiston rejected that version of the facts and said that Mr Ford told him to give him (Mr Ford) the money because then the end-user had been approved and the planes were ready in Australia to leave. It was put to him that in fact what had been indicated was that the approval of the end user had not formally been given but that Mr Ford was sure that it would be given. In reply to this suggestion Mr Battiston said,
sale were quite unusual and required considerable
legal and administrative review by the United
States Government. As a result of this review we
have determined that the proposed transfer would
not be in the best interests of the United
States. Accordingly, your request for the
transfer of these aircraft to Aviaco Ltd., has
been denied."
"No, he said, "It is approved.""It was then put to Mr Battiston that when the cheque for $500,000.00 from the escrow account was handed over to Mr Ford after it had been signed, the cheque to which I have earlier referred, he knew that the money was being paid over at the plaintiff's risk and that the plane was to be prepared and ferried from Australia to the United States. Mr Battiston replied,
"What I told Mr Herrera and Mr Bravo was that at54. In April 1983 Mr Battiston had travelled to Taiwan in connection with the aircraft purchase. Ford had informed the company that he did not have airforce personnel available to get the aircraft ready at that time. The Government had told him, he said, that the procedure to get the planes ready should be carried out at Tainan in Taiwan. He also said that the ground course for the crew had to be given there also.
the moment of signing for the last amount of
money in the bank, my responsibility was finished
regarding the signature in the bank, and the
company and its directors will have to continue
operating without my signature."
55. Mr Battiston spent about a month and a half in Taiwan. When the ground course had been completed, Mr Ford told Mr Battiston that both pilots and mechanics had to go to Singapore to be trained on a flight simulator for the aircraft. Mr Battiston went to Singapore and was there for some time in connection with the flight simulator program.
56. Mr Battiston was then asked whether or not he had a meeting with Mr Ford in San Francisco on 5 December 1985. He agreed that he had and that on that occasion he made a declaration. It is clear that Mr Ford asked Mr Battiston to put in writing his understanding of the position that obtained on 23 May 1983. Mr Battiston made a statement in writing in Spanish but did not sign it. A copy of that document was typed up on the note paper of Messrs Ford & Vlahos and was described as a declaration. A translation into English of the declaration was made and both typed documents were signed by Mr Battiston, his subscription to each being verified by a Notary Public.
57. The text of the declaration, in its English form as tendered, was as
follows:-
"This declaration I make at the request of58. Mr Ford gave his version of what had happened in the following terms:-
Mr Ford who asks me if I know the exact amount of
money that was paid. My answer is, Mr Ford, the
same question was made to me by Mr Pasqual Bravo
approximately two years ago and I answered it
when he made me Director of Operations of the
company for the C-130A project, for which I had
made an effectiveness study. I was only
designated to speak with Mr Pasqual Bravo's
authority with the Manager of the Bank Ganadero
of Panama to transfer to Barclays Bank of
San Francisco, $300,000. U.S. Dollars for each
plane that we would buy, thus the bank in Panama
was authorized by Mr Pasqual Bravo to transfer
$600,000. for two C-130 Hercules that we were
purchasing. These funds, product of the transfer
from Banco Ganadero, we deposited in an Escrow
Account in Barclays Bank of San Francisco with
the explicit order that funds could only be
withdrawn with my signature and that of the
General Manager of the company,
Mr Luis Carlo Herrera, and that they would be
used for the purchase of the Hercules. I only
know of this, and I never participated in any
other money transactions. If there were other
money transactions, they would have had to be
tran(s)acted by the General Manager of the
Company, Luis Carlos Herrera or Mr Pasqual Bravo,
a matter that did not concern me and that I had
no access to. After having effected the
negotiations for the purchase of the Hercules, a
number of problems presented themselves with
regard to the importation of the planes. First,
the approval by the United States Department of
State. Secondly, the acquisition of the Letter
of Credit from banks in Colombia, etc. etc.
There existed a serious doubt in the Company
Manager's mind and in that of Mr Bravo of
whether, after paying for the planes they would
come from Australia. The General Manager of the
company requested of Mr ford that the planes
should be in the United States in order to effect
the payment for same. Mr Ford stated that in
order to bring the planes to the United States,
we would have to transfer the funds from the bank
to australia and pay for the costs needed to
repair the planes, training of the crews in China
and the ferry. Under these conditions, the
planes could be placed in the Untied States.
Thus, the General Manager, Luis Carlos Herrera,
consulted with Mr Bravo and instructed me to
tranfer funds from Barlcays (sic) Bank to Mr
(F)ord. I was very clear and told them that
withdrawing the funds from the bank would mean
loosing (sic) the security that the bank had
given us of returning the funds to the transfer
agent, the Banco Ganadero in Panama in the event
the sale did not go through. The General
Manager, Mr Luis Carlos Herrera was very upset
and he told me that he had authorization of his
partner and that besides that, he was the Manager
of the Company and he authorized the
transaction. It was a risk that they accepted.
Thus I signed the authorization to give the funds
and I executed my signature on the respective
documents of the General Manager,
Mr Luis Carlos Herrera.
From then on, I did not wish to involve myself
with the funds of the company for any
negotiation. Besides which, I was the Technical
Director, not the Economics Director.
The planes arrived in the United State.
Subsequently, they were denied entry in Colombia
by the U.S. Embassy in Colombia. In light of
this and since I was contracted for the C-130A
Hercules Project and now it did not exist because
the planes did not arrive in Colombia, I resigned
from the company at the request of
Mr Pasqual Bravo.
At various times, I manifested to Mr Bravo
whether he would want me to assist him in the
undoing of the negotiations with Mr (F)ord. He
said no, and that he asked me not to speak with
Mr Ford. In fact, I never spoke again of the
negotiations with Mr Ford, nor with Mr Brqvo,
(sic) nor with Mr Herrera until this day,
5 December 1985
(Sgd) F Battiston
STATE OF CALIFORNIA )
COUNTY OF SAN FRANCISCO )
On this 6th day of December, 1985, before
me, MYRON S. MORGAN, a Notary Public, State of
California, duly commissioned and sworn,
personally appeared FRANK BATTISTON proved to me
to be the person whose name is subscribed to the
within instrument, and acknowledged to me that he
executed the same.
IN WITNESS WHEREOF I have hereunto set my
hand and affixed my official seal in the City and
County of San Francisco the day and year in this
certificate first above written.
(L.S.) OFFICIAL SEAL (Sgd) Myron S Morgan
MYRON S. MORGAN MYRON S. MORGAN
NOTARY PUBLIC - CALIFORNIA
CITY AND COUNTY OF SAN FRANCISCO
My Comm. Expires Sept. 16, 1988"
"As well as I can recall I said to them, "Frank,59. Two days earlier, on 21 May 1983, Mr Ford, in a telex to Mr Hocking, had outlined the difficulties in the way of the transaction and had then said,
Luis, we are doing everything we can to speed up
the process. I have been in contact with
Washington with both the United States government
and the Australian government. Mr Hocking, in
Australia, has been attempting to expedite the
procedures through the Department of
Administrative Services and through the other
elements of the Australian government that he
deal with, Foreign Affairs, or the American
Embassy, here in Canberra to expedite the
process. You have already obtained the
permission of the Colombian government. We have
already obtained the permission of the Australian
government. We are both now seeking the third
party approval of the United States government.
Any assistance that you can give me in that
respect would be appreciated. I will do
everything that I can to expedite it but if one
of the things that we want to do is physically
move the aircraft because they told me in that
conversation that they were having their own
difficulties with their Colombian approvals,
either they were lapsing or they would have to
renew them with the Colombian aeronautical
authorities, that if we took the step of ferrying
the aircraft across the Pacific Ocean, halfway
around the world, that in accordance with my
instructions from the Australian government it
would have to be at the buyer's risk."
And they agreed to that, and based upon that
discussion together, they executed the withdrawal
order - the cheque - that required all three of
our signatures in order to make the money
available for that purpose...
They had a discussion, as between themselves and
Mr Battiston was objecting to the delivery of the
cheque and we had a discussion backward and
forward for, I would say, five minutes
determining whether it was appropriate that they
take the risk of releasing those funds. And in
general, Mr Battiston was the second person to
sign the cheque, not the first. He had his own
reservations, as far as I could tell, from what I
witnessed but eventually the cheque was delivered.
At that time, what was your belief as to whether
there was in fact any real danger that the United
States would not ultimately give its end
user?---None whatsoever. I could not conceive
that eventually it would not be done because the
very first week that the end use application was
submitted the United States embassy in Bogota had
knowledge of the total transaction."
"The only way I can forestall this is advise that60. Earlier, Mr Ford was asked the following questions and gave the answers noted:-
one A/C can be ferried to overhaul facility for
inspection, repair, modification and/or overhaul,
at their risk."
"Well, at the time the contract was entered into,61. Mr Ford described the usual procedure. By the end of March 1983, $600,000 had been received from the plaintiff. He was asked questions concerning the second $300,000.00 which went to make up that sum,
did you expect that before anything of substance
was done to the planes, whether it be in terms of
the major get ready cost or in terms of the
ferrying the planes, that the end user would have
formally been obtained?---No question.
And you expected that to take about how long, in
general terms?---Sixty days.
...what was done as far as you are able to tell
us, in relation to getting the end user
approval?---The Department of State of the United
States has a printed form that they use."
"And what happened to that $300,000?---I believe62. Battiston gave evidence that the cheque for $100,000.00 which was signed on or about 7 February 1983 and in respect of which the receipt, Exhibit "DDD", was given, was not dated when it was signed. The cheque, which bore the number 8196, was eventually dated "June 23 1983". It certainly bears the signatures of Mr Battiston, Mr Herrera and Mr Ford and has typed upon it in the bottom left hand corner, the following:-
in the first instance it was put into a time
certificate of deposit in the name of Aviaco and
held for their account until such time as it was
to be used for the get ready - - -
That is later on, but when it was first paid in
was it going with the earlier $300,000 that you
mentioned was paid on - - -?---I think it was in
the same account, yes. I believe so.
And at that stage, was that account to the
benefit of Aviaco. Is that so---Yes, sir. For
any withdrawal it would require both the
signature of Luis Carlos Herrera and
Frank Battiston and myself."
""Get Ready" costs 212"The second figure "2" in that phrase, appears to have been typed over a figure which could have been "6". The date shown on the cheque, "June 23 1983", is not completely aligned so that the word "June" and the figures "23" appear to have been typed at a time different from that when the year "1983" was typed. Additionally, it appears from Exhibit "10", a photocopy of the cheque, that something may have been typed initially below the word "June" but I am unable to say what, if anything, was so typed.
63. A cheque dated May 15 1983 and numbered 8198 for the sum of $100,000.00 made payable to the order of Frank Battiston was drawn on the account but signed only by Mr Ford. It bears a notation "Costs" on the bottom left hand corner but the cheque obviously required the signatures of Mr Herrera and Mr Battiston as well and these were never subscribed to it.
64. Cheque number 8199 for the sum of $500,000.00 made payable to Barclays Bank of California, bears date 23 May 1983 and I am satisfied that it is the cheque which was given to Mr Ford following the conversation at the Clipper Club at Los Angeles International Airport on that day. It bears the endorsement "Transfer of A/C 130A to Tainan". It seems to me that the numbers of the cheques support Mr Battiston's statement that cheque number 8196 was not dated when it was signed, as he said, in February 1983. Cheques number 8198 and 8199 are in temporal order but cheque number 8196 is not. It seems to me, therefore, that I should accept Mr Battiston's evidence concerning the non-dating of the cheque when it was handed over in February 1983. In reaching this conclusion, I have endeavoured not to place too much emphasis on the matters which appear from the cheques themselves, matters to which I have referred above, but they do seem to support what Mr Battiston says and I can see no reason to doubt him on this aspect of his evidence.
65. Cross-examined as to the declaration, Mr Battiston was asked,
"...I put to you that when you and Mr Herrera hadMr Battiston replied,
discussions with Mr Ford at the Pan Am Building
in May of 1983, at that time what was planned was
that the planes should come to the United
States. Mr Herrera, the general manager was
saying to Mr Ford that the planes would be in the
United States before he would pay for them, and
you say in your statement that Mr Ford stated
that in order to bring the planes to the United
States, you would have to pay the funds from the
bank to Australia, or Government of Australia,
and to pay for the costs needed to repair the
planes, training the crews in China, and the
ferry, and under those conditions the planes
could be placed in the United States. That is
what you said, is it not?...So it was planned at
that time that the planes would not be taken to
Bogota, but be taken to the United States?"
"While the letter of credit arrived.."(IHe was then asked,
understood him to have meant "Until the letter of
credit arrived.")
"Not only the letter of credit, I suggest to you,He answered,
the approval by the United States Department of State."
"According to Mr Ford, it had been approved."Later he was asked,
"Look, at the time that you and Mr HerreraHe replied,
authorised the payment of the $500,000.00 cheque
to Mr Ford, you knew that the furthest the planes
could get to was America, and you knew that
because you knew that the end-user had not yet
been approved by the United States."
"No, according to Mr Ford it had been approved.He was then asked,
We believed it so much that we thought that is
why they let the planes leave, because the
end-user had been approved."
"Well, if you believed the end-user had beenHe replied,
approved, why didn't the planes come straight on
to Colombia?"
"Because Mr Ford put it as a condition that heThe next question was,
would not release the planes until he had
received the whole amount of money. And we were
so sure that the end-user had been approved that
the Australian government allowed the planes to
leave Australia with Colombian registration plates."
"You knew that there was no way those planesHe replied,
could leave the United States until end-user
approval had been granted, didn't you?"
"They were approved. We never thought of that.66. He was then questioned as to the words in the "Declaration", "It was a risk that they accepted". I should say at this point that I am satisfied that those words are an accurate translation of the Spanish words appearing in the original hand-written "Declaration". Those words were put to him and he said,
If the government - if the Australian government
allowed them to leave with Colombian registration
numbers, it was because they were approved."
"The risk that they accepted was what I wasHe was then asked,
saying before."
"Which was what?"And replied,
"It says, "I was very clear and told them thatHe was asked some further questions which I set out and gave the answers recorded:-
withdrawing the funds from the bank would mean
losing the security that the bank had given us,
because the bank had given me the security that
with my signature they would return the money...I
was not talking about other risks...I was very
clear and I told him that by withdrawing the
money from the bank would mean losing the
security that the bank had given to return the
money to the drawer, in other words, the
(Panamanian) Bank, ...should the negotiation not
be complied with."
"Right. You understood that if for any reason67. Mr Battiston was then cross-examined about another group of cheques. He agreed that the first, dated 23 June 1983 and drawn on the account of David Alvarez with a Florida Bank in favour of "Barclays Bank Australian C-130-Esc. Acc." for the sum of $9,000.00, was in his hand-writing save for Mr Alvarez' signature. Asked about this cheque, which bore the words and figures "Get ready cost 212", after the printed word "For", in Mr Battiston's hand-writing, he replied,
anything happened to prevent the sale being
completed and the planes being transferred to
Colombia, so far as the get ready costs were
concerned, costs incurred in getting the planes
ready and in bringing them across, that that risk
lay with Aviaco?---I did not say that in my
declaration, I only said that the security from
the bank was going to be lost and that was the
ogject of this declaration. If they gave another
meaning in their interpretation they assaulted my
good faith.
Mr Battiston, in September 1983 you were still
having conversations with Mr Ford about the
progress of things and in particular about
whether the United States was going to give
end-user approval?---For us it was approved. The
first time we heard that it had not been approved
was when the Ambassador in Colombia sent us a
letter telling us that it had not been approved."
"I really did not remember but maybe the company68. A second cheque, dated 1 July 1983 for the sum of $9,000.00 drawn on the account of Mr Battiston and his wife with a Miami Bank in favour of "Barclay Bank Australian C-130 Escrow Acc.", was also acknowledged by him to be in his hand-writing. It bore in the bottom left-hand corner after the printed word "Memo" the words and numbers "Get Ready cost 212" again in his hand-writing. He explained that cheque by saying that maybe Mr Bravo or Mr Herrera asked him to withdraw that amount of money as he was in Florida and he did it. He said they must have refunded him the money. It was put to him that both those cheques indicated that at that time he was organising payments of money from his own and Mr Alvarez' accounts in respect of "get ready costs". He had earlier agreed that the figures "212" and "216" were the numbers designating the aircraft. He replied,
asked Mr Alvarez to sell some US dollars and he
asked me to make out that cheque. That is what I
think happened."
"We were not paying, I never paid any moneys for69. Subsequently, he sought the opportunity to clarify something about the expression "get ready". He said,
the "get ready". If there is a cheque, one of my
cheques, there is maybe because the company asked
me to draw that money and then they paid me and
they asked me for the facilities of that, sending
that, mailing that cheque."
"I do not speak English so when they started70. Subsequently, in answer to a question he said that Mrs Lola Ford had, on 1 February 1983 when the contract was signed, told him what the words "get ready costs" meant. I am satisfied that when he wrote them on the cheques in June and July, he understood what they meant.
mentioning these terms "get ready" I asked
Mrs Lola Ford what it meant and I was told that
it was to prepare the claims and that was we are
paying the contract that is why we did that."
71. A third cheque, bearing date 6 July 1983, was drawn on the account of Mr Herrera and his brother with a Florida Bank in the sum of $9,000.00 payable to the order of "Barclays Bank, Australian C-130 Acct.". It bore in hand-writing in the bottom left-hand corner after the printed word "Memo" the words and figures "Get ready cost 212". Another cheque for $9,000.00 was drawn on 1 July 1983 in favour of "Barclays Bank, Autralian (sic) C-130 Acct." on the account of Guillermo or Elsa M Valbuena on a Miami Bank for the sum of $9,000.00. In the bottom left-hand corner of that cheque after the printed word "For" appeared in typewriting the symbols, words and figures ""GET READY" COSTS 212". On the same day, a cheque for $5,000.00 was drawn on the joint account of Mr and Ms Valbuena with another Miami Bank payable to the order of "Barclay's Bank, Australian C-130 Acct". It bore the same notation in the bottom left-hand corner after the printed word "For".
72. The final cheque to which I wish to make reference at this stage was drawn on 6 July 1983 on the joint account of Luis Carlos Herrera and Maria del Pilar Herrera on a Fort Lauderdale, Florida Bank for the sum of $9,000.00 payable to the order of "Barclays Bank, Australian C-130 Acct". It too bore in the bottom left-hand corner after the printed word "Memo", "Get Ready Costs 212". Both the Herrera cheques were signed by Luis Carlos Herrera.
73. Mr Battiston also gave evidence that he left the employ of the plaintiff on 15 January 1984.
74. Cross-examined as to when he first found out that the United States had
refused the formal end-user he replied,
"That it had not been issued; it was when IThat letter bore the date 24 February 1984. It was put to him that it became apparent in January that it was unlikely that the United States was going to change its mind and that as a result his employment with Aviaco was terminated on 15 January 1984. He replied,
received a communication, or the letter from
Mr Tambs - the Ambassador."
"Yes. They did not terminate my employment. IIt was then that he agreed that he had left the company on 15 January 1984.
asked the company to let me go. I did not want
to participate any more and I said I was
leaving. The company asked me to stay but I did
not want to."
75. I am satisfied that approaches were made to the United States Embassy in Bogota by Mr Ford and Mr Bravo in an attempt to have the Department of State reverse its decision and that those approaches were made either early in January 1984 or, at the latest, very shortly after 20 January 1984, about the time when Mr Ford had a discussion with Mr Bravo concerning the financial dealings between him and the plaintiff.
76. Earlier, on 28 March 1983, Mr Low had written an identical letter to the Secretary to each of the Departments of Foreign Affairs, Defence, Aviation and Defence Support concerning the disposal of the aircraft. He stated that any sale was subject to the prospective purchaser/s being acceptable to the Australian Government while the concurrence of the U.S. Government would also be required concerning end use/end-user details. He said that a substantial deposit had been provided by the Colombian Government in respect of two aircraft and that end-user certification had been executed jointly by the Colombian Government and Aviaco Ltd., Bogota and had been consularised by the Vice Consul of the U.S. Embassy in Colombia. He advised that get-ready work on the first aircraft (A97-212) was well advanced while the second aircraft (A97-216) could soon be brought up to the necessary standards. As a first step, the first aircraft was to be flown to Tainan Air Base where further maintenance work, corrosion control and repainting, would be carried out by Air Asia P/Ltd. The second aircraft would follow shortly thereafter for similar servicing whereupon both aircraft would fly via Dallas, Texas to Colombia. Public liability insurance and hull insurance were being arranged from San Francisco while airworthiness certification was being attended to. Colombian registration marks had been assigned for both aircraft and the Colombian Government had provided an import licence on an appropriate undertaking regarding disposition of the aircraft without prior U.S. approval. Mr Low asked that the foregoing details could be considered as a matter of urgency and advice provided as to whether the Departments had any objection to the proposal to sell the aircraft to the plaintiff.
77. A document forming part of Exhibit "GG" and described as "Notes of
Meeting with Mr Hocking held on 5 April 1983 re C130A's" included
the
following statement,
"As evidence of intent, Aviaco has authorised use78. A handwritten document, also part of Exhibit "GG", described as a synopsis of several telephone discussions with Mr Hocking in the days following the meeting of 5/4/83, recorded that Mr Ford had been advised by phone of the need for data on Aviaco and would provide it as soon as possible. The writer, P.A. Mackey, said, inter alia,
of $100,000 of the deposit money to be released
to get the aircraft ready and matters are
proceeding smoothly in this area ... Mr Hocking
stated that arrangements were going ahead for
training of Colombian personnel in engine
maintenance and flight time on simulator
equipment as a commercial venture and without
Australian Government involvement but that the
1 May target date was obviously unattainable.
Indications were favourable that additional funds
would be placed with Barclays shortly."
"I raised the question that the C'wealth had79. Mr Mackey made further notes of a discussion with Mr Hocking on 2 May 1983. The notes include a statement that,
offered the aircraft on an "as is" basis while
Ford appears to be going considerably further.
Mr Hocking assured me that this was being done at
the agent's own business risk and at no cost to
the Commonwealth. For example, the Colombians
had authorised Ford to spend considerable amounts
of money for "get-ready" work (over & above the
basic purchase price) and the Commonwealth would
be "held harmless" by various insurances (hull,
3rd Party etc)."
"... the $600,000 deposit is to be subsumed in80. By letter dated 20 May 1983, Exhibit "JJ", addressed to the Secretary of the Department of Foreign Affairs, Mr Low advised, inter alia, that as evidence of its bona fides, the plaintiff had already lodged in escrow the full purchase price for the two aircraft and had arranged for training of its engine maintenance personnel at National Airmotive Co., California. He said that pilot training was being undertaken in Singapore on the C130 Simulator operated by the Singapore Air Force. Aircraft overhauls were planned to be conducted at Air Asia Pty Ltd, Taiwan. Ferry flights from Australia to Colombia were to be carried out by authorised Australian flight crews.
the overall purchase price but another
substantial sum ($0.5m) has been put up by the
company from which Ford has been authorised to
draw up to $100,000 to assist in the "get-ready"
work in Australia."
81. By letter dated 31 May 1983 Messrs Stephen Jaques Stone James, Solicitors, advised Mr Low that they had been advised by Barclays in Sydney of the receipt in Sydney of AUS$500,000.00 from Barclays Bank of California in connection with the proposal to ferry immediately one aircraft to an agreed overhaul facility at the request of the purchaser, Aviaco Ltda. The funds were being held in the Ford and Vlahos account. That same day, Mr Butler, Assistant Secretary of the Department of Administrative Services, Purchasing Division, noted a telephone call from Mr Hocking which had taken place the day before. It recorded that, with the agreement of the Colombians, Ford had transmitted AUS$500,000 in the Ford and Vlahos Escrow Account to Barclays in Sydney. Mr Hocking was to arrange for Stephen Jaques Stone James to advise formally of this. The money was to be seen as a first payment on one aircraft which the Colombians hoped could now be sent overseas for overhaul.
82. On 3 June 1983 Mr Low reported to the then Minister, Mr Brown, concerning
the disposal of the aircraft. Included in his report
was the following,
"Should the aircraft be sold to Aviaco there is a83. By cablegram dated 23 June 1983, urgent advice was sought as to the response (which had been expected the week before) from the U.S. Department of State to the proposed sale to Aviaco.
need for them to be overhauled at a staging point
en route to Colombia. Aviaco had proposed to have
this work undertaken now in Taiwan at their expense."
84. When writing on 11 July 1983 to the Minister, recommending that the agency appointment of Ford & Vlahos should be extended to 30 September 1983, Mr Low advised that the plaintiff had deposited $US2 million with the escrow holders, Barclays Bank. He said that in addition, arrangements had been made for temporary Colombian civil registration numbers to be used for the ferry flights out of Australia and that training of Colombian pilots, air crew and ground maintenance staff had been commenced and overhaul work was intended to be carried out by a major U.S. repair facility experienced in the refurbishment of such aircraft. The Minister approved the recommended extension of the agency appointment.
85. Mr Hocking wrote two letters to Mr Low on 29 July 1983. In the first he
said, inter alia:-
"I refer to my letter of July 14, 1983 advisingWith that letter, there was enclosed a cheque payable to the Collector of Public Moneys, Department of Administrative Services for the sum of $482,875.00. That figure represented the sum of $500,000.00 less the sum of $17,125.00, the cost of effecting an insurance policy. The cheque was never banked. The reason was given in the second letter which said, inter alia,
you of AVIACO's request that ferry of aircraft
A97-212 (HK-3016-X) to the overhaul facility at
Dothan, Alabama commencing prior to the end of
July 1983.
For the reasons set out in that letter, Ford has
today again requested that approval be given to
allow the aircraft to be "positioned" immediately
at the overhaul facility in accordance with the
following procedures and safeguards:
(1) The aircraft will remain at all times under
the control of Capt. Kenneth C. Oliver,
Operations Manager/Mr P.W. Hocking,
Australian Representative, Ford & Vlahos.
(2) The aircraft is being flown by ex-RAAF
crews, all of whom have responsible senior
operational positions in the Australian
aviation industry.
(3) Transfer of title in the aircraft to AVIACO
LTDA will not take place until all of the
specified escrow conditions are completed.
(4) The respective aircraft "data plate" will
remain in the custody of the Department of
Administrative Services and not affixed to the
aircraft until the time of transfer of title.
(5) Lodgement with the Commonwealth of a
$500,000 bond/down-payment to meet all ferry
and associated costs (with the balance being
refundable to AVIACO) in the unlikely event
that the Commonwealth requires repositioning
of the aircraft to Australia for whatever
reason.
(6) The protection of the Commonwealth's
financial and other interests by means of
the two insurance policies presently in place....
Accordingly, your approval is sought as a matter
of urgency for the above positioning flight and
appropriate departure documentation (eg. letter
setting out conditions governing the movement of
the aircraft).
Failure on the part of Ford & Vlahos to comply
with AVIACO's request may prejudice this sale,
the sale of aircrafts A97-216 and A97-208 to
AVIACO and, subsequent sales. In Ford's words
today, "There are no risks to the Commonwealth in
now agreeing to AVIACO's request - and everything
to gain from doing so] Someone must take a decision
if the transaction is to be completed successfully."
Please find attached Barclays Australia Limited
cheque (No. 008675) on behalf of AVIACO for
$482,875.00 (the balance of $17,125.00 being the
cost of effecting the insurance policy as advised
to the Deputy Crown Solicitor's Office July 28,
1983). Would you please arrange the deposit of
these funds in an interest-bearing account (with
interest to the escrow account) if the funds are
not transferred to Consolidated Revenue."
"As it is not now practicable to undertake theMr Hocking said that he was also asked to advise that the funds would be kept in Australia and would continue to be available in order to effect delivery of the aircraft to Alabama at the appropriate time.
positioning flight of A97-212 to the overhaul
facility in Alabama, AVIACO have instructed us to
withdraw the bond cheque accompanying our earlier
letter of today's date and lodge it with Barclays
Sydney in escrow."
86. By a telex message dated 25 September 1983, Mr Hocking asked Mr Butler,
to provide urgent assistance to expedite the Washington
approval process. He
advised that Aviaco had called Ford that day to advise of their decision to
withdraw from the pending sales
unless affirmative action were taken
immediately to expedite the approval process in Washington to allow the first
aircraft (No.
A97-212) to depart from Australia for overhaul at the earliest
opportunity. He also advised that the Australian Government had not
requested
formal approval to sell the aircraft to Aviaco and to allow transhipment of
the aircraft for required maintenance. He
said that to date the only approval
request made by the Australian Embassy in Washington had been on an informal
basis. He asked
Mr Butler to direct immediately one Des Biddle, apparently an
Australian representative in contact with the United States Department
of
State, to lodge a formal request for approval of the Aviaco sales with the
U.S. State Department so that no further administrative
delays would be
encountered. He then said,
"Failure to do so will result in Aviaco's87. By minute dated 30 September 1983, Mr Butler advised the Minister, in recommending the extension of the agency appointment to 31 January 1984, that Aviaco had already lodged an amount of $A1m. in the escrow account for one aircraft and was believed to be interested in acquiring a further one or possibly two if the initial transfer took place smoothly.
withdrawl (sic), the return of their deposited
purchase funds and the loss of 3 aircraft sales."
88. On 12 October 1983 Mr Low forwarded a cablegram to the Counsellor Supply
in the Australian Embassy at Washington to advise that
Mr Ford had advised
through Hocking that the Colombian sale was now in jeopardy due to the
imminent expiry of the Colombian Government
permit to import aircraft of the
type. He said also that Ford had advised that the U.S. Department of State
had not yet determined
its position on the proposal. He then said,
"We are told aircraft must be relocated toHe ended the cabelgram by saying,
Alabama prior to 28 October 1983 to enable
overhaul to be completed in time for aircraft to
be ferried to Colombia before end November 1983.
"Formal proposal and lodgement of money advice enWashington replied next day to advise that the formal request to the Colombian Government had not yet been released but should be with Assistant Secretary Schneider of the Department of State by early the following week for final consideration. The cablegram went on to say that despite delays, aircraft relocation to Alabama prior to 28 October 1983 was possible. As to that relocation, it was said that the U.S. Department of State's reasoning was that even though formalities had not been completed on the third party transfer, no impediment existed to ferrying the aircraft to Alabama by Ford under similar arrangements that had been used in respect of the sale to the French. This could be done at any time but Hayes International, the Alabama overhaul facility, would not be given a licence to overhaul the aircraft for the Colombians until third party assurance was received from Bogota.
route from Ford. We have sought Departmental
clearances and will advise you as soon as
possible to enable you to seek U.S. approval."
89. The next day another cablegram from Washington advised that the U.S. Department of State was satisfied with the bona fides of the plaintiff and informal assurances provided by the Colombian Government on the third party transfer and that Department support in principle for the sale to the plaintiff occurred when Mr Schneider signed the "off on" letter to Bogota seeking formal third party assurances from Colombian Government.
90. On 20 October 1983, the Department of Administrative Services at Canberra
requested support from a number of Departments for
the proposed transaction
and went on to say,
"Provided all necessary approvals are obtainedBy telex dated 21 October 1983, the Counsellor Supply at the Australian Embassy, Washington, advised Mr Low that Mr Schneider had signed "off on" correspondence enabling formal third party assurances to be sought from the Colombian Government. He also said that Ford was aware of State's support in principle for the sale to Aviaco and was making plans for ferrying the aircraft to Hayes International.
today I propose to telex Washington Embassy
seeking immediate formal approach to U.S. State
for approval to sales."
91. An outward cablegram to Washington from Canberra dated 21 November 1983, advised that the only outstanding matter preventing finalisation of the sale was the United States' consent.
92. By letter dated 26 October 1983 Mr Hocking, as Australian representative of Ford and Vlahos and using that firm's notepaper, wrote to Mr Low to confirm settlement arrangements in respect of the two aircraft. He said, inter alia, that funds had been committed for the purchase of the two aircraft and associated spares on touch-down of aircraft A97-212 (3212) in Dothan, Alabama, USA. He said further that on fulfilment of all remaining escrow conditions (formal U.S. consent (that was the only remaining condition then)), Barclays Bank of California would transmit the purchase funds for each aircraft and associated spares to Barclays Bank, Sydney for the payment to the Commonwealth of Australia, at which stage title in the property would then transfer to Aviaco Ltda. He said that aircraft A97-212 would depart Laverton on Friday, 28 October for Richmond and would leave Australia from Richmond on Saturday, 29 October and was expected to arrive in Alabama on Tuesday, 1 November (Australian time). Purchase funds would be transferred immediately as soon as formal U.S. consent was received.
93. Then came the advice from the United States Department of State that the request for approval of the proposed transfer to the plaintiff was denied. I am satisfied that the denial came as a shock to the parties and to Messrs Ford and Hocking.
94. Mr Ford gave evidence of the time when he received notification of the
denial of approval. He said,
"It would have been just late November - late -He said that he communicated the news to Mr Battiston, initially, as he was sure, by telephone. There was concern as to the reason for the denial. Consideration was given to the way in which the objection, which appeared to have arisen at the United States Embassy in Bogota, might be overcome, particularly since there had been no objection in Washington.
just before Christmas."
95. Steps were taken subsequently by Mr Ford, Mr Bravo (to whose evidence I will refer in more detail shortly), Mr Battiston and Dr Soto. They provided material to the United States Embassy in Bogota but were unsuccessful in having the determination reversed.
96. Mr Ford gave evidence that, once that position had been established, he and Mr Bravo had discussions about what could be or should be done with the plane and what could or should be done in regard to the moneys that they had paid on account of the planes.
97. Mr Pascual Bravo Munoz (Mr Bravo) gave evidence that he founded the
plaintiff company in 1982. By the time the matter came on
for hearing his
interest in the company was, he said, by public deed to continue with the case
in Australia. He put the position
in this way,
"AVIACO has the right to any money recovered forHe was then asked,
damages in this case and that money will be
transferred to my family, in other words, my wife
and my children."
"This is under an agreement that you have enteredHe replied,
into with AVIACO, is it?"
"Yes."He agreed that the agreement was in relation to the sale of his interest in the company. In 1982, as well as being the principal share holder in the plaintiff through his family company, he held the office of Deputy Manager, an office having the same functions as a General Manager, and continued to hold that office for approximately one year until some time in 1983.
98. He identified the relevant Colombian import licences which, with the extensions granted, would have been valid to at least 17 May 1984 and possibly to 8 June 1984, it matters not which.
99. In cross-examination, Mr Bravo said that he had several conversations by
telephone with Mr Ford through Mrs Ford who acted as
interpreter before
January 1984. He said that in general terms, the conversations which he had
were about the price of the planes,
the transfer of the planes from Australia
to the United States, the end-user, Incomex import licences, and the funds
which had been
given to Mr Ford. As he said, he knew the business well,
"centimetre by centimetre". He said that he received no receipts from
Mr Ford
in respect of the moneys which had been paid. He said that Mr Ford always
confirmed through Mrs Ford that he had received
the money. He said that he
received a statement only in January 1984, a statement to which I shall come
shortly. He then gave evidence
that he recalled receiving a telephone call in
May 1983 from Mr Herrera who was at the time with Mr Battiston in Los Angeles.
The
matter raised in the telephone call was whether $500,000.00 in the escrow
account should be transferred across to Mr Ford. He agreed
that he authorised
Mr Herrera and Mr Battiston to sign the cheque across to Mr Ford but added,
"Yes, for the Australian Government."He was then asked whether or not the money was to be used to get the planes ready and to ferry the planes to the United States. He denied that, saying that the money was part payment for the money that the Australian Government was asking for in order to clear the planes. He denied any understanding at the time that in the event that the planes did not get to Colombia for any reason the risk would lie with Aviaco so far as the amounts paid out by it were concerned. He persisted in his view that the moneys which Mr Ford had received were on account of the final purchase price of the aircraft and were not paid over for "get-ready costs" at the plaintiff's risk. He was then shown a document, Exhibit "MMM", the text of which I set out hereunder.
"January 20, 1984100. It was put to him that the Statement showed an amount of $50,000.00 apparently paid to Mr Ford on 20 January 1984. Eventually he agreed that it had been so paid.
STATEMENT
AVIACO LTDA.
Apartado Postal 151122
Airport El Dorado
Bogota, Colombia
ATTN Luis Carlos Herrera, President
Frank Battiston, Director of Operations
Sale of two C-130 Hercules Aircraft
Serial No. 0012 and 0016 TOTAL: $ 3,375.000.
$3,375,000 Purchase Price $700,000. Initial Deposit
2/A/C, Spares 85,000. 11-8-83
Ferry, Training 45,000. 11-20-83
55,000. 12-13-83
$ 985,000 Paid 50,000. 12-29-83
50,000. 1-20-84
$2,390,000 Balance due $985,000.
20 Jan 84
(To Be Paid)
$2,120,000. L/C Union Bank
$2,200,000. 80,000. Panama Bank
190,000. Balance Due $2,200,000.
After L/C and
Panama Payment
Plus Additional Costs:
$42,000. Painting (Hayes)
$ 5,325. Union Bank Charges
$15,000. Additional Travel
$62,325. $62,325. (Wash.D.C. & Colombia)
$252,325. Bal. Due after L/C and Panama Payment."
101. He was questioned about two letters from the plaintiff's Australian
solicitors. The significant part of one of those letters,
dated 25 July 1985
and written to Messrs Ford & Vlahos, was as follows:-
"Our clients' claim in brief is that certain102. Earlier, on 22 July 1985, the plaintiff's Australian solicitors had written to the Department of Administrative Services. Included in that letter was a statement in the following terms:-
monies held in Escrow deposit account with the
Barclays Bank, San Francisco, have not been
properly accounted for and in particular have not
been returned to the depositor, Aviaco. Further,
as a consequence of the aborted transaction, our
clients have lost considerable sums having
expended considerable sums beyond those deposited
in the Escrow account to facilitate the
completion of this transaction which expenditure
has since proved futile. Our clients would seek
a proper refund of the balance of the funds held
in Escrow not properly accounted for to date
together with general damages. One particular
item that our clients will be seeking specific
damages for relates to the installation in both
aircraft of civil navigational equipment.
...Of particular concern to our clients at this
stage are the following:-
1. Details of all withdrawals from the Escrow
Accounts held at Barclays Bank, California.
2. Full details of the circumstances surrounding
your advice to our clients given by your
letter dated 19 August 1983 which stated that
the U.S. Department of State had given its
verbal approval in substance to the proposed
Aviaco C-130A purchase.
3. The basis upon which the Australian
Government gave approval to the transfer of
the aircraft from Australia prior to the
written consent of the U.S. Department of
State being obtained.
In relation to point 2 above, we would advise
that our clients accepted this advice in good
faith, acted upon it and incurred a considerable
expense as a consequence only to be advised at a
later date that U.S. approval had been withdrawn.
In relation to 1 above, we are advised that
Escrow accounts can only be activated upon the
signatures of both parties, in this case
yourselves and Aviaco. As we are presently
instructed, our clients have not given their
consent or signature in writing authorising the
withdrawal of all funds held in the Escrow account."
"Our clients are concerned primarily at this103. Mr Bravo was further cross-examined to suggest that that correspondence indicated that what was being asked for was a refund of what was left in the account. He replied that he was asking for the whole amount of $985,000.00. He was then asked whether he was aware that his solicitors had put the view that the plaintiff had accepted advice in August 1983 that the U.S. had given end-user approval. He said that he was aware of that. Senior counsel for the defendant then put to him the following question:-
stage to receive a full accounting from the
agents in respect of all withdrawals from the
escrow accounts. Further by virtue of letter
dated 19th August 1983, the agents informed our
client company that the U.S. Department of State
had given its "verbal approval in substance" to
the proposed Aviaco C-130A purchase. Our clients
accepted this advice in good faith, acted upon
it, and incurred considerable expense as a
consequence only to be advised at a later date
that U.S. approval was withdrawn. We propose to
investigate this matter at length.
...We are instructed that notwithstanding the
requirements that escrow accounts cannot be
operated without two signatures, in the case in
hand those of the agents and Aviaco, our client
does not have full knowledge of all bank dealings
and in particular we are instructed did not sign
for the release of all moneys held in escrow.
...We understand that your Department was not
aware until recently of the current disputation
between our client and the agents (and through
them the Commonwealth) and in particular of the
failure by the agents to properly account for the
nearly One Million dollars held in escrow. We
would have thought it appropriate in the
circumstances for the Commonwealth to suspend
temporarily the agency arrangement until the
agents have satisfied the Commonealth that they
properly accounted for all funds in escrow and
have satisfactorily explained why they gave our
clients the advice that verbal U.S. approval had
been obtained. Further, they should explain in
our respectful opinion why it was that the planes
were transported at our clients' expense prior to
U.S. approval in writing being obtained. We
would be grateful also to know why the Australian
government gave approval to the removal of the
planes at the time it did.
In relation to this last point, could you please
advise who gave the authority to have the planes
transported, under what statute, regulation,
authority, etc. if any was the said person
acting, when was the decision made and if in
writing, please forward evidence of same."
"Mr Bravo, my point is this, these lettersMr Bravo replied,
indicate that Aviaco's case was, that the planes
were transported at Aviaco's expense. And what
you were concerned about was that you believed
that Mr Ford had misled you back in August or
thereabouts of 1983 when he told you that
approval had been given. You believed it was the
formal approval and he believed it was, or he
stated it was, simply a verbal approval, not in
writing, and you believed that Mr Ford had
thereby tricked you?"
"First of all, that is a very long question. IHe was then asked,
am going to answer it little by little. We never
believed that the planes were going to leave
under our risk or under our own account. There
was a discussion with Mr Ford because he does not
acknowledge having received the moneys when we
gave them to him. We always believed his letters
that the end-user had been approved. That is why
we gave the money."
"On the basis of the letter that he wrote to youHe replied,
in August 1983?"
"Yes, and before that."He was then asked the following questions and gave the answers set out:-
"When you subsequently found out that the formal104. I refer again to Mr Hocking's first letter of 29 July 1983 referred to above wherein he said,
approval was not to be granted you were annoyed
that Mr Ford had told you the wrong thing, you
believed, some six months earlier?---I was hoping
for him to return the money as an honest and
commercial person should have done.
Look, Mr Bravo, you knew, did you not, that these
planes had to be insured whilst they were carried
from Australia to America?---Yes.
And you understand, do you not, that an insurance
policy was taken out?---We took it.
You took it?---Yes.
So you had the planes insured and you paid for
the policy?---The planes had Colombian
registration from the moment they left Laverton
and for that reason we had to take the policy at
the request of the Australian Government.
And who had to pay for that policy?---Us.
And was that something over $A17,000?---That is
what Mr Ford says he paid for from the first
policy that he took that was any good and then he
asked us to take one - to take a new one because
they had Colombian registration.
And you understood the responsibility for the
insurance lay with Aviaco?---That if the plane
would fall in the sea or suffer an accident as
the letter of credit was not ready it was in order
to insure the plane so that it would not be lost.
Because by that time you had still not organized
the letters of credit guaranteeing the payment of
a million dollars for each plane to the
Australian Government?---Yes.
And as you sit there today you do not believe
that the Australian Government should pay you
back your insurance money, do you?---There are
many amounts of money that we are going to try
and obtain from the Australian Government like
all of the money that Mr Ford took.
What do you say about the money that was paid out
for the insurance premium?---We have lost it.
You understand that money was paid out of the
$500,000 that was transferred from the escrow
account?---Sorry, I missed that last part.
You believed that the insurance policy was paid
for with money out of the $500,000 transferred
from the escrow account?---No, that is apart from
the policy that we took. They are two different
policies. One for Mr Ford and the other one from us."
"Please find attached Barclay's Australia Limited105. In giving evidence, Mr Bravo identified a number of cheques, the proceeds of which, he said, came by various means into the hands of Mr Ford. He also referred to a withdrawal of the sum of $290,000.00 from a Panamanian bank account which he operated. $85,000.00 of that, he said, was eventually given to Mr Ford. The date of the withdrawal of the total sum of $290,000.00 appears to have been 19 October 1983. One cheque for $100,000.00, Exhibit "HHH", was dated 1 December 1983. Mr Bravo said that its proceeds were eventually given to Mr Ford. The cheque appears to have been debited to Mr Bravo's account on 1 December 1983. Another cheque for the sum of $50,000.00 drawn on 19 December 1983, was paid on that date, apparently to Mrs Dora Leonora Munoz, and the proceeds were eventually given to Mr Ford.
cheque (No. 008675) on behalf of AVIACO for
$482,875.00 (the balance of $17,125.00 being the
cost of effecting the insurance policy as advised
to the Deputy Crown Solicitor's Office July 28, 1983)."
106. A further cheque dated 3 January 1984 for the sum of $50,000.00 payable to Alberto Garcia was identified by Mr Bravo as a cheque which he asked Mr Garcia to cash for him in Panama, giving the proceeds to Mr Ford. However, reference to the photocopy of the bank statement shows that cheque to have been credited to the account rather than debited to it.
107. There was a meeting between Mr Bravo and Mr Ford in Bogota held, as I am satisfied for reasons which will appear later, sometime after 20 January 1984 following which, although some weeks later, confirmation of the denial of the approval of the sale to the plaintiff of the two aircraft was received from the United States Ambassador to Colombia.
108. Mr Bravo gave evidence of his meeting with Mr Ford, by arrangement, at the Bogota Plaza Hotel in Bogota. Mrs Ford was the only other person present at the meeting . The document, Exhibit "MMM", was discussed. Mr Bravo described it as a statement of the moneys delivered for the purchase of the planes in Australia. He said that he did not agree with the document because Mr Ford had acknowledged receipt only of $985,000.00 and Mr Bravo had told him that he had sent more money than that. He said there was a lot of discussion about it but Mr Ford had knowledge only of that amount.
109. Using Hotel notepaper, Mr Ford then prepared a document headed
"Recapitulation". I set out its text:-
"$3,375,000 PURCHASE PRICE A/C & sparesIt became Exhibit "NNN".
985,000 PAID ON ACCOUNT RECEIVED BY
$2,390,000 BALANCE DUE (Sgd) John J. Ford III
PAYABLE $1,200,000 L/C
1,000,000 L/C
2,200,000 2,200,000
$ 190,000 DUE
PLUS STRIPPING AND PAINTING
HAYES AND OAKLAND, OTHER"
110. One significant feature of Exhibit "MMM" is that it acknowledges the receipt by Mr Ford on 20 January 1984 of the sum of $50,000.00 referred to above. Mr Bravo was asked about that $50,000.00 and agreed that it was paid in cash on that day. He had earlier said that Mr Ford was asking for the money all the time. He said that Mr Ford did not ask specifically for the amounts that were paid by cash on any of the occasions when cash payments were made to Mr Ford and he agreed that Mr Ford was simply saying, "Pay us as much as you can". He described the payments as a sign of good faith that the plaintiff wanted to comply with the contract as soon as possible.
111. Mr Bravo explained the existence of the document Exhibit "NNN" by saying that he wanted to have a written statement about what Mr Ford had received in the name of the Australian Government because he had never asked Mr Ford for any receipts.
112. It was suggested to Mr Bravo that by March 1984 it had been put to him
that if he could sell the planes to some other buyer
acceptable to the United
States, the plaintiff would get all its money back. He replied,
"He had been saying those things for a long time."113. Mr Bravo was asked whether in March 1984 he had discussed with Mr Ford the suitability of another company's taking over the plaintiff's purchase of the Hercules aircraft. He replied,
"There is no reason why not to give a good advice114. In answers to Interrogatories 2(g)(i) and (ii), the plaintiff gave details of the payment of $US285,000.00 as follows:-
to a person."
(1) US$85,000.00 on or about 8 November 1983115. I turn now to some further evidence given by Mr Ford. He was asked why he obtained $300,000.00 from the plaintiff instead of $200,000.00 which was all that was necessary to enable the plaintiff to inspect the aircraft in Australia. He said that he thought the requirement was a minimum on behalf of the Commonwealth and,
(2) US$45,000.00 on or about 20 November 1983
(3) US$55,000.00 on or about 13 December 1983
(4) US$50,000.00 on or about 29 December 1983
(5) US$50,000.00 on or about 20 January 1984
"...we felt that if the transaction went forwardHe referred to the escrow conditions and was then asked this question,
that it would require that amount of money at
least to get the aircraft ready and to deliver them."
"At the time when the contract was entered into,He replied,
about the beginning of February 1983, at that
time what was your expectation as to when it
would be likely that the contract would be
concluded and the planes delivered in Bogota?"
"Sixty to 90 days after the submission to theHe was then asked a number of questions and gave the answers recorded:-
Australian Government, that it would take to
confirm the financial dealings and to get the
governmental approvals."
"Had you had experience in the past of getting116. Mr Ford confirmed that in March of 1983, a further sum of $300,000.00 was received from the plaintiff for the second aircraft.
government approval, of various sorts,...in
connection with the aviation industry?---Yes, sir.
And at the time that the contract was entered
into, did you expect that the planes would be
completely got ready, and had the overhaul in
that sense, prior to formal end-user being
given?---No, sir.
At the time the contract was entered into, did
you anticipate that the planes would leave
Australia to go to the United States as in fact
occurred, before formal end-user was given?---No,
sir, as a matter of fact I think the contracts
themselves provided that they were going to go to
an overhaul facility.
Yes. Well, at the time the contract was entered
into, did you expect that before anything of
substance was done to the planes, whether it be
in terms of the major get ready cost or in terms
of the ferrying the planes, that the end-user
would have formally been obtained?---No question.
And you expected that to take about how long, in
general terms?---Sixty days."
117. It is clear from Mr Ford's evidence, and I so find, that he expected initial "get ready" costs to be met from the $100,000.00 in respect of which the receipt, Exhibit "DDD", was given.
118. In examination in chief Mr Ford said that he believed that the cheque for $100,000.00 in respect of which Exhibit "DDD" was written, was transferred in June 1983 to the Australian trust account as "get ready, ferry, delivery" money. $600,000.00 had therefore been transferred from the escrow account in America to the Bank of New South Wales account in Australia. At 23 May 1983 Mr Ford believed that there was no real danger whatsoever that the United States would not give end-user approval to the sale. Mr Ford also gave evidence concerning the procedure which had to be followed in the United States Department of State. When he wrote the letter of 19 August 1983 he understood the position to be that, in substance, approval had been given and there remained merely the procedural aspects of transmitting assurances from Washington to Colombia and back from Colombia to Washington. Again at that time it was his view that the aircraft should not be ferried until final approval had been given.
119. Mr Ford arranged, pursuant to Clause 4 of the Agreement for Sale of 1 February 1983, that the aircraft be made ready to fly across the Pacific Ocean and that a crew be engaged for that purpose, the necessary work and arrangements paid for by Mr Hocking and Mr Oliver out of the money that had been obtained from the plaintiff.
120. Pursuant to paragraph 5, Mr Oliver, said Mr Ford, hired a pilot, co-pilot, cargo handler and engineer. Appropriate registration in Colombia was obtained. Mr Battiston obtained Colombian marks and a Colombian ferry flight permit. The costs involved were also paid by Ford and Vlahos out of the money that had been obtained from the plaintiff. As well, the aviation gasoline necessary for the flight, was paid for by money obtained from the plaintiff. In the end, the overhaul facilities to which the aircraft were flown were located at Oakland, California and Dothan, Alabama. The seller's obligation under paragraph 6 of the Agreement was partly completed but, of course, the end flight from the overhaul facilities to Colombia was never made.
121. Mr Ford gave evidence further that the cost of the training referred to in paragraph 7 of the Agreement was met from the money that had been advanced by the plaintiff. It was, he said, paid in effect by him on the plaintiff's behalf.
122. He described the receipt of moneys from Aviaco as follows:-
"Varying amounts were paid at varying times,The cash payments were made by a representative of the plaintiff at Mr Ford's office in San Francisco. He believed more than one person made the payments but could not be sure whether it was the same person each time. He was asked whether he provided receipts for the cash which he received and replied that when the first payment was made he made out a receipt very similar to the one he had made out for the earlier withdrawal order (by which I assume he meant Exhibit "DDD") and he said that the gentleman who delivered the money said it was not necessary to have a receipt. On subsequent occasions when payments were made, he provided no receipt although he offered to do so only to be told that none was necessary.
sometimes by cheque, initially by release of the
money that had been deposited and sometimes in cash."
123. He then said that in January 1984 he was asked to go to Bogota to meet Mr Bravo, the principal of the plaintiff company, whom he had not previously met. He said that Mr Bravo was concerned about the amount of money that had been paid. The two spent two days at least going over Mr Bravo's records of his payments to his own people while Mr Ford went over the amounts that he had expended or had received on behalf of the plaintiff. They reached, "an account stated which (Mr Bravo) requested that I put in writing". This he did. He said it constituted the best evidence of what they were able to determine as the proper figures at that time. He said that Mr Bravo claimed that there was a great deal more that had been paid by him to his own people and therefore the two spent some time discussing the final account stated. The document, Exhibit "MMM", constituted the account stated, so called.
124. I cannot be certain of the dates upon which that meeting took place.
Certainly, it was no earlier than 19 January 1984 but Mr
Bravo gave evidence
that the original of Exhibit "MMM" was received in his office before the
meeting. Mr Ford's evidence was to
the effect that the document was "hammered
out" over two days and was prepared at Mr Bravo's request. He said,
"...we reached an account stated which heMr Bravo, on the other hand, said,
requested that I put in writing which I did..."
"The original of this document had arrived at theThat detail has the ring of accuracy. Significantly, too, the document is addressed to the plaintiff at what appears to be a post office box number and is marked for the attention of Messrs Herrera and Battiston. It makes no reference to Mr Bravo and one would expect that had the meeting taken place on 19 and 20 January 1984, it would have been marked for the attention of Mr Bravo or addressed to him. It will be remembered that by this time Mr Battiston had left the employ of the plaintiff, on 15 January 1984, but it seems to me to be highly unlikely that Mr Ford would have known of his departure from the plaintiff company by 20 January 1984.
company and I did not agree with it. He
(Mr Ford) went to his room and brought a duplicate
of this document, and we talked about it."
125. It is, I think, important to determine, so far as can be done, what was
the precise date upon which Mr Battiston and the plaintiff
learnt that the
formal end-user had been denied. This was the subject of a deal of cross-
examination. Mr Battiston was asked when
he first found out that the United
States had refused the formal end-user. He replied that he had learnt of that
refusal upon receipt
of a letter from the United States Ambassador to
Colombia, Mr Tambs. That letter was dated 24 February 1984. After a number
of
questions were put to him he said that,
"... there were so many doubts about the approvalI do not doubt that such a letter was sent since the letter from Ambassador Tambs of 24 February 1984 is in apparent response to a letter of 3 February 1984 and addressed to Dr Soto, described as the General Manager of the plaintiff. The letter began,
that we finally sent a letter to the Ambassador
in order for him to tell us the truth."
"Thank you for your letter dated 3 February, inThe letter concluded,
which you mention the possibility of importing to
Colombia two Hercules C-130 planes for Aviaco Ltda."
"Finally, for reasons that have been explained to126. I set out a passage from the cross-examination of Mr Battiston:-
the Australian Government and its commercial
representatives, the State Department has decided
that it would not be convenient for the United
States to allow this transfer."
"Look, in January 1984, you asked Mr Ford to come127. Mr Ford gave evidence that he communicated the facts of the refusal of end-user approval to Mr Battiston by telephone call, as he was sure, initially and that subsequently he and his wife went to Bogota in early January 1984 for the purpose of going to the United States' embassy "to confront them with what were the difficulties". He said that that was the first time he met Mr Bravo. It follows that his statement that he went to Bogota in early January 1984, must, on the basis of my earlier finding that that meeting took place somewhere between 20 January 1984 and 3 February 1984, be in error.
to Bogota to see if anything could be done about
getting a reversal of the United States
refusal?---I rang Mr Ford to tell him that and he
said he was coming to Bogota to talk to the
people at the embassy because he was a friend of
them. Mr Ford said, "I don't understand why the
ambassador" - - -
...................
And I put to you that in January of 1984 you
invited Mr Ford and his wife to stay in your
house?---If you are so sure, they must have
stayed at my place, it could have been January or
February, I do not remember.
And you know that there were approaches made to
the embassy in Bogota by Mr Ford and also
involving Mr Bravo?---Yes. And they talked to
the second secretary of the embassy and Mr Ford
asked for an appointment.
And this was because the United States had
refused the end-user and it was to see if
anything could be done about it?---Yes.
And it became apparent, became clear, in the
January that it was unlikely that the United
States was going to change its mind? And as a
result of that, your employment with Aviaco was
terminated on 15 January 1984, was it
not?---Yes. They did not terminate my
employment. I asked the company to let me go. I
did not want to participate any more and I said I
was leaving. The company asked me to stay but I
did not want to.
All right. You left the company on
15 January 1984?---Yes.
And you had been engaged by the company solely in
respect of the Hercules aircraft and the
operation of it?---I was employed by the company
as the manager for operations for all the
different planes that they have and the different
operations.
Once it became clear that the Hercules planes
were not going to come to Colombia, there was no
purpose for you remaining with Aviaco, was
there?---Yes, it was still necessary because the
company was going to try to have other planes in
operation.
The reason that you left the company on
15 January was that by that time it was clear to
Aviaco that the end-user approval had not been
granted and that the planes were not to be
permitted into Colombia?---That is not the
reason. I signed a very different contract and
it is written."
128. Giving due consideration to all the evidence, I think that the refusal by the United States Department of State to give approval to the proposed end-user was known to the principal officers of the plaintiff by not later than 15 January 1984 and, more probably than not, by some time well before Christmas 1983.
129. I set out in summary the findings of fact which I think important.
1. At all material times, Ford and Vlahos were duly130. Once that approval had been granted, and I am satisfied that Mr Ford fully expected it to be granted by not later than 30 April 1983, the contract would have been for all practical purposes an unconditional one. In these circumstances, one might have expected that Mr Ford would have approached the plaintiff with a view to having it agree to the expenditure by him of moneys which had been deposited in escrow.
appointed sole agents to sell 10 Hercules aircraft and
associated spares on behalf of the defendant.
2. The escrow procedures referred to in the instrument of
appointment were those set out in the document headed
"Seller's Escrow Instruction, (Sale and Delivery:
Aircraft I)"
3. So far as was applicable, those instructions set
limits on the authority given Ford and Vlahos by the
defendant.
4. Messrs Herrera and Battiston were the duly appointed
agents of the plaintiff authorised to negotiate the
purchase from the defendant of the two aircraft in
respect of which the Agreement for Sale was entered
into.
5. On 1 February 1983, that Agreement for Sale, the text
of which is set out above, was entered into, being
executed for the defendant by Messrs Battiston and
Herrera and for the plaintiff by John J Ford III.
6. At the same time, an undated Purchase Order, the text
of which is also set out above, was executed by being
signed by the same persons on behalf of the plaintiff
and defendant.
7. On 7 February 1983, an order authorising the
withdrawal of $100,000.00 from the escrow account into
which $300,000.00 had been paid, was executed by
Messrs Battiston and Herrera.
8. The sum of $100,000.00 just referred to was for
"costs, fees, expenses allocable to C-130A Get Ready
program".
9. By not later than 7 February 1983, Ford had told
Battiston that if some of the conditions were not met,
the money deposited would be refunded.
10. Training of the plaintiff's ground crews in respect of
Hercules aircraft was carried out at Oakland,
California and was paid for by the plaintiff. In
Mr Battiston's words,
"The staying (by which I assume he meant board)
tickets, food, everything was paid by Aviaco."
11. Later in April and possibly in May 1983, further
training of the plaintiff's ground crews was carried
out at Taiwan. This training was paid for by Mr Ford
as agent for Aviaco from funds supplied by that company.
12. Sometime in April 1983, Mr Mackey expressed some
concern that Mr Ford appeared to be going considerably
further than the sale of the aircraft on an "as is"
basis, to be assured by Mr Hocking that this was being
done at the business risk of Ford & Vlahos and at no
cost to the Commonwealth. He was further told that,
for example, the Colombians had authorised Ford to
spend considerable amounts of money for "Get-ready"
work over and above the basic purchase price and that
the Commonwealth would be "held harmless" by various
insurances.
13. In May 1983, on a date which I cannot precisely
identify, the plaintiff was becoming concerned that
the planes had not arrived because Mr Ford, who had
earlier told the plaintiff's representatives that the
end-user had been approved (scilicet informally)
telephoned them to say that the approval had not been
cancelled but had been stopped by the United States
Department of State because they (sic) had caught a
couple of Hercules planes in Brazil with arms and the
Department wanted to study the situation a bit more.
14. On 2 May 1983, a further discussion between Mr Hocking
and Mr Mackey included a statement by Mr Hocking that
the deposit was to be subsumed in the overall purchase
price but that $500,000.00 had been put up by the
plaintiff from which Ford had been authorised to draw
up to $100,000.00 to assist in the "Get-ready" work in
Australia.
15. In May 1983, the plaintiff's officers were aware that
the end-user approval which Ford had told them earlier
had been given, had not been finalised. It was
subject to "stopping", as had happened in May 1983,
and Ford, writing on 19 August 1983, made it clear
that formalisation of that approval had, for a number
of reasons, not been obtained, even though, as he said
in the letter, the US Department of State had given
its verbal approval in substance to the purchase some
time before.
16. In a meeting held on 23 May 1983 at the Clipper Club,
Los Angeles International Airport, the plaintiff,
through Messrs Battiston and Herrera, handed to
Mr Ford with the authority of the plaintiff, a cheque
for the sum of $US500,000.00 in circumstances referred
to in Mr Battiston's "Declaration", Exhibit "11". The
English translation forms part of the exhibit. That
cheque bore the endorsement "Transfer of A/C 130A to
Tainan".
17. By 31 May 1983 that sum had been transferred to
Barclays Bank in Sydney, the funds being held in the
Ford & Vlahos account.
18. On 3 June 1983, Mr Low reported to the then Minister
that should the aircraft be sold to the plaintiff,
there was a need for them to be overhauled at a
staging point on route to Colombia and that the
plaintiff had proposed to have this work undertaken
in Taiwan at its expense.
19. A cheque for $100,000.00 drawn on the escrow account
was signed on 7 February 1983 but not dated or
negotiated until 23 June 1983. It bore the notation
""Get Ready" Costs 212" and is the cheque signed
following the execution of the so-called receipt for
$100,000.00, Exhibit "DDD".
20. Six cheques drawn by various persons in favour of the
Australian C130A Escrow account at Barclays Bank,
California for amounts totalling $50,000.00 between
23 June 1983 and 6 July 1983, were cashed and their
proceeds delivered by various persons to Mr Ford.
Each cheque, the details of which are set out above,
bore an endorsement that it was for the "get ready"
costs of the aircraft identified shortly as "212".
21. At all material times Mr Battiston understood
perfectly well the meaning of the English words "Get
Ready Costs".
22. On 14 July 1983, Mr Hocking wrote to Mr Ford advising
of the plaintiff's requests that ferrying of aircraft
no. 212 to the overhaul facility at Dothan, Alabama
should commence before the end of 1983.
23. By his first letter of 29 July 1983 Mr Hocking
repeated that request and enclosed a cheque for
$482,875.00 with a request that its proceeds be
deposited in an interest-bearing account, with
interest to the escrow account, if the funds were not
transferred to Consolidated Revenue. The difference
between the amount of that cheque and the amount of
$500,000.00, $17,125.00, represented the cost of
affecting an insurance policy taken out at the expense
of the plaintiff in respect of the aircraft.
24. That same day, Mr Hocking asked that the cheque be
withdrawn because it was not then practicable to
undertake the positioning flight of aircraft 212 to
the overhaul facility in Alabama. It is to be noted
that he described the cheque as "the bond cheque" but
that the funds were to be kept in Australia and would
continue to be available in order to effect delivery
of the aircraft to Alabama at the appropriate time.
25. Mr Ford wrote the letter of 19 August 1983, the text
of which is set out above.
26. Between 12 October and 21 October 1983, procedures for
obtaining the end-user approval appeared to proceed
smoothly. By 21 November 1983 the only outstanding
matters preventing finalisation of the sale were the
consent by the United States Department of State and
the lodging of the balance of the purchase moneys or
the Letter of Credit representing them.
27. On 30 November 1983, the United States authorities
refused end-user approval.
28. By at latest, 15 January 1984 and more probably before
Christmas 1983, the plaintiff knew of the refusal of
approval.
29. The statement, Exhibit "MMM", was forwarded on
20 January 1984 to the plaintiff and was not received
by them until sometime after that date.
30. Despite its knowledge of the refusal of end-user
approval by the United States Department of State, the
plaintiff made one payment of $50,000.00 to Ford on
20 January 1984 after it had gained that knowledge
and, very probably, after it had gained that
knowledge, made an earlier payment of $50,000.00 on
29 December 1983 to him. It is possible, although I
make no definitive finding as to this, that the
plaintiff also paid Ford $55,000.00 on
13 December 1983 after learning of the refusal of that
approval. The dates of those three payments are
confirmed by the plaintiff's answer to interrogatories
2(g)(i) and (ii).
131. Indeed, it seems to me that what happened went far beyond the "as is" sale contemplated by the defendant as appears from the Escrow Instsructions, allowing, of course, for the "Getting Ready" of the aircraft and all necessary preparation for the ferry flight to the approved country of destination.
132. What seems not to have been taken into account, in the events that happened, was the fact that Mr Ford, acting as broker, would either have to provide or have provided to him quite large sums of money to enable the aircraft to be ferried to the intermediate overhaul facility and thence to Colombia or would have to make some arrangement with the plaintiff once the contracts had become, in effect, unconditional for the necessary moneys to be paid from funds provided by the plaintiff. There was absolutely no evidence before me to indicate that Mr Ford or his firm might have been in a position to provide these moneys. But nobody on behalf of the defendant or the plaintiff except, no doubt, Mr Ford himself, appears to have taken this potentially serious difficulty into consideration at any time.
133. It is true, I think, that he anticipated the end-user approval and that he and Mr Hocking proceeded on the basis of that anticipation. No other explanation of the memorandum of 2 May 1983 comes readily to mind but the money referred to in that memorandum, or at least the $US500,000.00 released on 23 May 1983, was not used until after it was transmitted to Australia. The $US500,000.00 had reached Australia by 31 May 1983 but it is clear from Mr Hocking's letters of 29 July 1983 and from the cheque accompanying the first of those letters, that except for the sum of $17,125.00, which I am satisfied was spent by the plaintiff or with its authority, none of that money was expended until after 29 July 1983.
134. On all the evidence, I am satisfied that Mr Ford gave a truthful account of his expectations in relation to the approval and of the events of 23 May 1983. I am also satisfied that the letter he wrote on 19 August 1983 was the exact and literal truth and not in any way deceptive. It reflected his optimism concerning the expected approval but did not, in my opinion, constitute a document designed to deceive the plaintiff or its officers or agents. As well, I can understand that the time limit for the importation into Colombia of the two aircraft set by the Colombian government would have been seen until it was appropriately extended as meaning that it was necessary that the aircraft be positioned at the overhaul facilities in America so that the work which the plaintiff required to be performed on them could be carried out before they were ferried to Colombia within the time which had been set originally by the Colombian authorities.
135. While in some respects Mr Ford was not a satisfactory witness (I have regard particularly to his method of accounting, distinguished chiefly by the absence of any formal documentation, and I take into account the difficulties which he had with the Californian Bar Association), on the whole I accepted him on the vital matters in this case as a witness of truth.
136. On the other hand, I found Mr Battiston and Mr Bravo to be evasive on the critical question which was, "what was their understanding of the risk they undertook to which Mr Battiston referred in the "Declaration" of 5 December 1985."
137. I have read and reread that "Declaration". I am satisfied that the words used by Mr Battiston in the vital sentence, "It was a risk that they accepted", faithfully reflect the meaning of the words as written initially in Spanish and that no other meaning should be attributed to them but that for which the defendant contends.
138. I am satisfied that in spending the money on "get ready" costs and in positioning the aircraft so that they might be overhauled in time to be flown to Colombia after end-user approval within the time limit set by the Colombian authorities, Mr Ford was acting as agent for the defendant.
139. That this meaning is the correct one is supported, I think, by the many cheques drawn on Florida banks to which I have referred, each of which bears a note indicating that their purpose was for the "get ready costs" at least of aircraft no. 212.
140. I think Mr Battiston's reluctance to sign the cheque on 23 May 1983 and his immediate attempt to distance himself from the financial aspects of the negotiations except for two cheques drawn on Mr Alvarez and his and his wife's accounts, reflect his view that the defendant was putting itself at risk of having all the money used for get ready costs before end-user approval was obtained and at the risk that it might not be obtained.
141. I note also the payment of $17,125.00 in respect of the insurance policy from the amount of $500,000.00 transmitted to Australia in July 1983. Although it is possible that it was the premium for a policy other than the one to which Mr Hocking referred in his letter to Mr Low, I think that on the balance of probabilities the policy referred to by Mr Hocking was that referred to by Mr Bravo in respect of which he agreed that an amount of over $17,000.00 was expended at the plaintiff's expense and risk.
142. The explanation that the moneys which were transmitted to Mr Ford by the plaintiff, in what seems to be an extraordinarily unbusinesslike fashion, were moneys forwarded on account of the purchase price of the aircraft, seems to me to be totally unsatisfactory. Of course it is true that, had approval eventually been given by the United States Department of State, those moneys would have been taken into account as part of the purchase price but I am satisfied that in the meantime those moneys were forwarded to meet the continuing heavy expenses payable in respect of the preparation of the aircraft and their eventual delivery to Colombia.
143. When Mr Bravo met Mr Ford in Bogota at a time when he must have known of the State Department's denial of the end-user application, he did not immediately demand repayment of the moneys which had been entrusted to Mr Ford by the plaintiff. Instead, after learning of that denial, Mr Bravo paid Mr Ford a further $100,000.00 and may well have paid him a further $55,000.00 again. Payment of those sums is, I think, inconsistent with the plaintiff's contention that the money expended by Mr Ford was to be repaid if the end-user was not finally approved.
144. It is important to note that no letter of demand in respect of the alleged debt seems to have been sent until August 1985. If the situation had been as the plaintiff claimed, one would have expected such a letter to have been sent within a very short time after Ambassador Tambs' letter of 24 February 1984.
145. I think too, that the balance due as shown in Exhibit "MMM" indicates clearly that Mr Ford was engaged in activities on behalf of the plaintiff, namely, arranging for painting of the aircraft and engaging in travel on the plaintiff's account. While it might be thought that the "Account stated" was consistent with the plaintiff's claim, it seems to me that it was no more than an invoice prepared in expectation that the difficulty encountered with the State Department would be overcome.
146. In all the circumstances the plaintiff has failed to satisfy me on the balance of probabilities that it has made out its claim for money had and received and there must, therefore, be a verdict for the defendant.
147. I will hear argument on the question of costs.
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