Islena De Inversiones S.A. De C.v (Trading as Islena Airlines) v Jefferson and Jefferson Travel Services Ltd
| Jurisdiction | Cayman Islands |
| Judge | Harre, C.J. |
| Judgment Date | 22 April 1998 |
| Court | Grand Court (Cayman Islands) |
| Date | 22 April 1998 |
Harre, J.
Grand Court
Agency - Duties and liabilitities of agent — Duty to account to principal — Duty to keep own finances separate
Ritch & Conolly for the plaintiff
Quin & Hampson for the defendants
By a letter dated August 2nd, 1991 the plaintiff, which operates an air service between George Town, Grand Cayman and Honduras, appointed new representatives in the Cayman Islands. That letter was addressed to Mr. John Jefferson Jr. of Jefferson Travel Services Ltd., George Town, Grand Cayman and read as follows:
“Islena Airlines of Honduras, C.A. formally appoint you as representative of our airlines in the Cayman Islands as of August 30th, 1991.
Islena Airlines will be conducting flights between Grand Cayman and La Ceiba, Honduras, and vice versa.
Islena Airlines will pay Jefferson Travel Ltd. a 10% commission on all sales conducted by the above agency or your assistant, Mrs. Norma Jean Bennett, under the Cayman rules and Civil Aviation Regulations.”
Mr. Wood is the President and General Manager of the plaintiff. I shall refer to the plaintiff as Islena and shall need to refer to other contemporary documents in some detail to indicate my view of the contractual arrangements between the parties.
A letter from Mr. Wood, dated the previous day, August 1st, 1991, relating to the appointment had been written to the Director of Civil Aviation. It read as follows:
“Islena Airlines has decided to change its representative from Mr. Graham Thompson to Mr. John Jefferson Jr. and his assistant Mrs. Norma Jean Bennett (Jefferson Travel Services Ltd.) as of August 30th, 1991.
I also request that you give Mr. Jefferson all the assistance you have rendered to our past agent, Mr. Thompson, to continue serving the Cayman Islands, with our airlines services uniting your country with Honduras and Latin America.”
There was a further letter dated August 29th from Mr. Wood to the Acting Director of Civil Aviation, Mr. Pat Johnson, in the following terms:
“I wish to confirm my request to have my permit No. 19/1991 reissued on No. 6 of said permit to read as our local representative Mr. John D. Jefferson Jr. (of Jefferson Travel Services Ltd.) to represent Islena Airlines as our new agent in the Cayman Islands as of August 30th, 1991: All others points should remain the same.
If there is no inconvenience to you in this matter, we hope our request will be approved immediately.”
There is an issue as to whether the appointment was for Jefferson Travel Services Ltd., Mr. John Jefferson Jr., or both. The present case concerns the termination of the agreement and its consequences.
The plaintiff's principal witness was Mr. Arturo Wood. He described the nature of the arrangement between the parties, and this is common ground to the extent, which I now describe. Revenue was collected by the agent from ticket sales, express letters and excess baggage charges. From the gross revenue the agent was entitled to deduct 10% commission and office expenses. There was some disagreement as to the extent of the latter entitlement but it is not significant. It was the agent's responsibility to pay from revenue banking fees, the price charged by Texaco for aviation fuel, and the cost of general services by Cayman Airways (“CAL”) such as baggage handling and the checking in of passengers. CAL was responsible for collecting excess baggage charges and passing over the money to the agent.
According to Mr. Wood, the weekly balance was to be accounted for to Islena in a report. Mr. Jefferson's evidence was that that arrangement was changed to once every two weeks. In the event, neither arrangement was complied with. The evidence of Mr. Wood, which I believe, was that after a while his accountants repeatedly came to him asking him to speak to Mr. Jefferson to find out why the weekly reports and cash remittances were not arriving on time. Matters took a more serious turn in 1994. A letter dated February 9th, 1994 was sent in the following terms, to Mr. Wood in Honduras by the Director of Civil Aviation in Cayman:
“I refer to my fax of February 3rd, 1994 and write to confirm that the Civil Aviation Authority has no objection to Islena's proposed schedule effective from February 12th, 1994. However, we do note that your operating permit issued by the Air Transport Licensing Authority expired on December 31st, 1993. Please ensure that you received the necessary permits from the ATLA for your operation.”
At the foot of the letter was the following hand-written note from Mr. Wood to Mr. Jefferson:
“Please have an interview with ATLA at Civil Aviation concerning the above letter, follow-up and advise you are Islena representative and can sign for me.”
The annual licence renewal was also the subject of a letter dated March 3rd, 1994 addressed to Mr. Jefferson by the Secretary of the Air Transport Licensing Authority. It approved his application dated March 1st and contained the following passage:
“A sum of CI$700 or US$853.65 must be paid to the Civil Aviation Authority in respect of Air Operations Permit within 30 days, or this approval will become void.”
No payment was made until after the agency agreement was terminated. Nevertheless, the agent's report to Islena dated April 30th, 1994 showed a deduction of $853.65 in respect of the “Islena Licence.” Mr. Jefferson's explanation for this was that the payment had simply been overlooked. On any view, the failure to attend to such an important matter as the payment of the Air Operations Permit fee, even after reminders and the warning in the letter dated March 3rd from ATLA, was a serious default.
The next significant event took place some time in May 1994. Mr. Wood's evidence, is that he was visited in Honduras by three officials of CAL — Mr. Mike Adams and two of his assistants, Mr. Wader and Mr. Bodden. Their visit concerned amounts, which they said, were owed by Islena for ground-handling charges. Mr. Wood's response was to produce the agent's reports showing that the money had been deducted in Cayman. On seeing these, Mr. Adam refused to accept money from Mr. Wood and said he would take the matter up with Mr. Jefferson on his return to Cayman.
When giving evidence, Mr. Jefferson questioned whether Mr. Adams and his colleagues had visited Honduras in this way at all, but conceded that he had no knowledge one way or the other. There being no evidence to the contrary, I accept Mr. Wood's account.
Another issue between the parties arose in May 1994. On May 11th, Mr. Jefferson had written — on paper headed “John D. Jefferson Jr., MLA” but signed “John D. Jefferson Jr., MLA, Jefferson Travel Services Ltd., President/Chairman” — to the Airport Manager of CAL. It notified him that “ we have agreed to allow Air Agencies Ltd. to serve as our customer and ground-handling agent.” [Emphasis supplied.] Various complaints were set out in the letter as factors influencing the decision.
On receipt of a copy of this, Mr. Wood sent a fax to Mr. Jefferson saying that he urgently needed to talk with him about Air Agencies. His evidence was that he was so concerned that he wrote the message himself rather than getting his secretary to type it. On the same day, May 11th, 1994, Mr. Wood sent the following message to Mr. Jefferson with a copy to CAL:
“No instructions from this office have been issued to you, or to Air Agencies Ltd. for ground services for Islena Airlines.
I have instructed via phone Mr. Mike Adams to continue giving my airline the necessary assistance while operating to and from the Cayman Islands. Please bring up to date all charges that you owe Cayman Airways for their services and also your balance to Islena Airlines. That is long overdue.
I will be travelling to Grand Cayman very shortly to take care of all matters personally.”
There were two more letters on this topic dated May 12th from Mr. Jefferson. One was to Mr. Wood and the other was to Mr. Adams of CAL. In each he referred to his dissatisfaction with the service provided by CAL and also acknowledged that sums were due to CAL for handling charges. He disputed the amount but offered to make arrangements to pay once the correct amount had been determined.
There is also correspondence addressed to Mr. Jefferson from the general accountant of Islena during May 1994, culminating in the following on June 1st:
“I'm to remind you again that you have not sent any sales transaction reports for the month of May, and haven't added interest to the value subtracted for the copy machine and the air conditioning, so please send me the transactions for May and the value subtracted.
Thank you for your attention.”
Matters came to a head during the first week of June. On June 3rd, Mr. Wood wrote to Mr. Jefferson as follows:
With effect from June 4th, 1994, I have taken the decision to relieve you from the responsibility as Islena Airlines' representative in the Cayman Islands.
Past correspondence between you and Cayman Airways and outstanding bills has forced me to take this step.
Please bring up to date all moneys you have for Islena Airlines, and also accounts outstanding to Cayman Airways and all others.”
Mr. Wood and a colleague visited the office of Jefferson Travel Services Ltd. and removed records relating to the Islena agency. Mr. Jefferson's response is to be found in the following two letters which he wrote to Mr. Wood on paper headed “John Jefferson Jr., MLA.” They are dated respectively June 4th and July 10th, 1994:
“June 4th, 1994
I refer to your letter of June 3rd, 1994 advising of the decision to terminate the agreement of me acting as the local agent of Islena Airlines. Our records indicate that all revenue from ticket sales and excess baggage has been accounted for...
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