Goldtrail Travel Ltd ((in Liquidation)) v Onur Air Tasimacilik as
| Jurisdiction | England & Wales |
| Judge | Lord Wilson,Lord Neuberger,Lord Hodge,Lord Clarke,Lord Carnwath |
| Judgment Date | 02 August 2017 |
| Neutral Citation | [2017] UKSC 57 |
| Date | 02 August 2017 |
| Court | Supreme Court |
[2017] UKSC 57
Lord Neuberger, President
Lord Clarke
Lord Wilson
Lord Carnwath
Lord Hodge
THE SUPREME COURT
On appeal from: [2016] EWCA Civ 20
Appellant
Michael Gibbon QC
Ms Hannah Ilett
(Instructed by Druces LLP)
Respondent
Robert Miles QC
Hilary Stonefrost
(Instructed by Fieldfisher LLP)
Heard on 27 April 2017
( with whom Lord Neuberger and Lord Hodge agree)
The appellant ("Onur"), a Turkish corporation, appeals against orders made by Patten LJ in the Court of Appeal on 21 January 2016.
An understanding of the nature of his orders requires reference to the following summary of the background.
(a) On 22 May 2014 Rose J, [2015] 1 BCLC 89, gave judgment against Onur in favour of the respondent ("Goldtrail"), a UK company in liquidation, in the sum of £3.64m plus interest.
(b) On 15 December 2014 Floyd LJ granted permission to Onur to appeal to the Court of Appeal against the order of Rose J on the basis that the appeal had a real prospect of success.
(c) On 11 June 2015 Floyd LJ, by way of variation of an earlier order for the imposition of conditions upon the continuation of Onur's appeal, made it conditional, among other things, upon Onur's payment into court (or provision of other security for it) of £3.64m by 9 July 2015.
(d) On 29 October 2015, in the absence of any payment into court (or provision of other security), Goldtrail applied for an order dismissing Onur's appeal and on 7 December 2015 Onur cross-applied for an order that the condition for payment into court be discharged on the ground that it could not comply with it and that the effect of dismissing the appeal by reference to it would be to stifle the appeal.
(e) At the hearing before Patten LJ on 14 January 2016 of the application and cross-application referred to at (d), Goldtrail, in disputing that the condition for payment was such as to stifle Onur's appeal, relied in particular on the financial relationship between Onur and its wealthy owner, Mr Bagana.
As explained by Patten LJ in his reserved judgment dated 21 January 2016, his orders were first to dismiss Onur's cross-application and thereupon to grant Goldtrail's application for an order that, by reason of Onur's failure to comply with the condition imposed on 11 June 2015, its appeal should be dismissed.
In the above circumstances this court is asked to address the principles by reference to which the Court of Appeal should determine an application by a respondent/claimant that, as a condition of any appeal to it, the appellant/defendant should pay into court (or otherwise secure payment of) part or all of the judgment sum awarded against it in the court below; and in particular to identify the principles by reference to which it should appraise a respondent's contention that an appellant's financial relationship with a wealthy third party is such as to defeat its complaint that such a condition would stifle its appeal. In the event there has been little dispute between the parties as to the principles which the Court of Appeal should apply. The more lively issue has been whether Patten LJ can be seen to have applied those principles in reaching his conclusions first that Onur's relationship with Mr Bagana was such as to defeat its complaint that the condition for payment would stifle the appeal; second that the condition should therefore remain in being; and third that, in the absence of compliance (or proposed compliance) with it, Onur's appeal should therefore be dismissed.
Prior to its liquidation, Goldtrail was a holiday tour company which had been wholly owned by Mr Aydin. Onur is a Turkish airline, largely owned by Mr Bagana. In the proceedings before Rose J Goldtrail, by its liquidator, sued Onur in relation to two agreements and, irrelevantly for present purposes, sued other defendants in relation to other agreements. The claim against Onur arose out of the latter's aspiration to cause Goldtrail to buy seats for its tourists on Onur's flights between the UK and Turkey. Such was the context of agreements that Mr Bagana would buy 50% of Mr Aydin's shares in Goldtrail for £1m (which he paid) and that Onur would pay £3.64m (which it paid) to another company owned by Mr Aydin for its purported brokerage of an agreement by Goldtrail with Onur to buy a specified number of seats on its flights. Rose J found that, properly analysed, the payment of £3.64m represented consideration for Goldtrail's agreement to buy the seats; that, in breach of his fiduciary duty to Goldtrail, Mr Aydin had diverted receipt of Onur's payment away from Goldtrail to his other company; that Onur had dishonestly assisted Mr Aydin in thus defrauding Goldtrail; and that it should pay damages to it in that sum.
In January 2015, following the grant on paper of permission to Onur to appeal against the order of Rose J, Goldtrail applied for the imposition of conditions. It was too late for it to apply under Rule 52.3(7)(b) (now Rule 52.6(2)(b)) of the Civil Procedure Rules for the actual permission to be made subject to conditions. It therefore applied under Rule 52.9(1)(c) (now Rule 52.18(1)(c)) for the court to exercise its discretion to "impose … conditions upon which an appeal may be brought". Paragraph (2) of Rule 52.9 (now Rule 52.18(2)) provided that the court should exercise its powers under para (1) only where there was a compelling reason for doing so.
By its application, Goldtrail requested conditions that Onur should pay or secure £600k under interim orders for costs made by Rose J; should provide security for Goldtrail's costs of the appeal in the sum of £150k; and in particular should pay into court the sum of £3.64m which Rose J had awarded to it by way of damages. In response Onur entered no substantive challenge to the request for the first two conditions. The dispute related to the requested payment into court of the judgment sum. Goldtrail relied on the agreed fact that in October 2014, after 22 years of flying its aircraft to the UK, Onur had ceased to do so; and Goldtrail submitted that, since Onur was likely to have no other assets even temporarily in England and Wales, there was a compelling reason for the judgment sum to be secured. Onur's response was that its decision to cease flights to the UK had been taken for operational reasons and that there was no evidence that it had taken steps or would take steps to obstruct enforcement of the judgment in the event of the dismissal of its appeal. What at that time Onur did not allege was that the disputed condition would stifle its appeal.
By an order on paper dated 7 April 2015 Floyd LJ imposed the disputed condition. Onur exercised its right to cause him to reconsider his decision at the hearing which took place on 11 June 2015. Although in his judgment Floyd LJ expressed a willingness to assume that there was a respectable commercial explanation for the cessation of Onur's flights to the UK, he maintained his earlier conclusion that there was a compelling reason for imposing the condition. Upon Onur's continuation of the appeal, he therefore imposed the condition that it should pay into court (or otherwise secure payment of) £3.64m by 9 July 2015.
On 14 July 2015, by then in breach of the condition, Onur applied for variation of it so as to permit it to make the payment into court by seven monthly instalments. On 27 July 2015 Floyd LJ on paper refused the application but shortly before 21 October 2015, when pursuant to Onur's request he was due to reconsider it at a hearing, Onur changed its stance. Its new contention was that the condition for payment of the judgment sum into court was a breach of its rights under the European Convention on Human Rights and was unlawful and that therefore the payment would not be made. So Floyd LJ dismissed the application for variation and directed that Goldtrail's oral request for the consequential dismissal of Onur's appeal be made by formal application.
Thus it was that on 14 January 2016 Patten LJ heard not only the anticipated application by Goldtrail for dismissal of the appeal but also a cross-application by Onur dated 7 December 2015 for discharge of the condition for payment into court of the judgment sum on the ground — asserted for the first time — that its continuation in force would stifle the appeal.
The relevant findings, observations and conclusions of Patten LJ in his judgment dated 21 January 2016 were as follows:
(a) Mr Bagana was extremely wealthy and had, for example, given evidence to Rose J that £5m was not a significant outlay for himself personally.
(b) He directly held 3.67% of the shares in Onur and held 81.19% of the shares in a company which held a further 92% of the shares in Onur.
(c) Between 2008 and 2011 Onur had paid substantial dividends to him, which he had lent back to it, secured against its assets.
(d) In 2013 he lent US $28m to Onur.
(e) By 2014 his loan account with Onur had increased to $68m.
(f) For some reason Onur had guaranteed debts owed to him by another shareholder.
(g) As Onur's largest secured creditor, Mr Bagana was in a position to decide which of Onur's unsecured debts should be paid and at what time.
(h) He had a more than usually close relationship with Onur and effectively controlled its financial affairs.
(i) According to Onur's Chief Financial Officer, Mr Bagana had said that he would contemplate making further loans to Onur only in exceptional circumstances to enable it to make commercial payments necessary to keep it in business.
(j) With Mr Bagana's support Onur was able to continue to trade.
(k) Even had it been difficult for Onur to make the payment into court out of cash generated from its trading activities, it could have done so with his...
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