Koza Ltd and Another v Mustafa Akçil and Others
| Jurisdiction | England & Wales |
| Judge | Richard Spearman |
| Judgment Date | 16 November 2017 |
| Neutral Citation | [2017] EWHC 2889 (Ch) |
| Docket Number | Case No: HC-2016-002407 |
| Court | Chancery Division |
| Date | 16 November 2017 |
[2017] EWHC 2889 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Richard Spearman Q.C.
(sitting as a Deputy Judge of the Chancery Division)
Case No: HC-2016-002407
Lord Falconer of Thoroton, Siward Atkins and Tom Hickman (instructed by Gibson Dunn & Crutcher LLP) for the Claimants
Jonathan Crow QC and David Caplan (instructed by Mishcon de Reya LLP) for the Defendants
Hearing dates: 22 September and 9 October 2017
Richard Spearman Q.C.:
Introduction
This is an application by the first claimant ("Koza Limited"). It arises out of an Order made by Asplin J on 21 December 2016 ("the Order") and, in particular, an undertaking given by Koza Limited in the First Schedule to the Order that, until trial or further Order, Koza Limited "will not dispose of, deal with or diminish the value of any funds belonging to [it] or held to [its] order other than in the ordinary and proper course of business" ("the Undertaking"). The application is made pursuant to paragraph 2 of the Order, which provides that the parties shall have liberty to apply "including in relation to the undertakings set out in the Schedules hereto". The Order embodied the agreement of the parties to continue, with minor variations, a regime which had been put in place as a result of an application for various injunctions which had been made by Koza Limited to Snowden J without notice on 16 August 2016 and the continuation by consent on 25 August 2016 of the interim relief that had been granted by Snowden J.
The application seeks orders (a) declaring that four classes of expenditure are within the terms of the Undertaking, alternatively (b) that the Undertaking be varied "for good reason" to permit that expenditure. The application notice (dated 20 June 2017) states that the reasons for the application are (i) that the expenditure is in the commercial interests of Koza Limited and, if not allowed, is likely to impede its business activities; (ii) that the expenditure would not offend the purpose of the Undertaking, which is said to be "to ensure that orders of the court are not rendered ineffective by expenditure that is not for legitimate business expenses"; and (iii) that the expenditure is "necessitated by the extreme and unique circumstances facing the claimants". One of those classes of expenditure, relating to the release of funds to pursue applications before the European Court of Human Rights, was not pursued at the hearing before me, because on 4 May 2017 (but on Koza Limited's case unknown to it at the time when the application was issued) that Court had made a ruling the effect of which is that the applications are or will be inadmissible due to a failure to exhaust domestic remedies in Turkey. In the result, this judgment is only concerned with the remaining three classes of expenditure.
The application is resisted root and branch by the sixth defendant ("Koza Altin"), in essence on two grounds. First, the proposed expenditure does not fall within the terms of the Undertaking because it would not be made "in the ordinary and proper course of business" of Koza Limited. Second, the Order should not be varied so as to permit the expenditure, in particular because that would enable the assets of Koza Limited, which is a wholly-owned subsidiary of Koza Altin, to be used not for the benefit of Koza Limited, but instead for the benefit of the second claimant ("Mr Ipek") and his family.
Koza Altin made clear that, in resisting the application in this way, it did not intend to give up or prejudice a jurisdictional challenge to these proceedings which it had argued before, and which had been rejected by, Asplin J. Koza Altin's appeal against that decision of Asplin J was heard by the Court of Appeal on 13 and 14 September 2017, and judgment was reserved. At the time of the hearing before me that judgment was still awaited, but it has since been handed down by the Court of Appeal: see Koza Ltd & Anor v Akcil & Ors [2017] EWCA Civ 1609. The appeal was dismissed for reasons given by Floyd LJ, with whom Flaux LJ agreed. The outcome of the appeal does not affect the matters that I have to decide, although I am fortunate in now being able to adopt the exposition of these proceedings that is contained in the judgment of Floyd LJ.
At one stage, issues were flagged up concerning the admissibility of materials that were served late. As the hearing progressed, however, both sides referred to these materials without objection, and this judgment proceeds on the basis that these points have gone.
Lord Falconer appeared for Koza Limited and Jonathan Crow QC for Koza Altin. I am grateful to them, and to their juniors and solicitors, for the high standard to which this case was prepared and presented, and in particular for their well-argued submissions.
The proceedings in outline
What follows is substantially in the words of the judgment of Floyd LJ.
The proceedings concern a dispute between rival parties over the management and control of Koza Limited. Mr Ipek is a director of Koza Limited and a member of the family which owns the corporate group to which Koza Limited belongs ("the Koza Group"). The Koza Group is a large Turkish-based mining and media conglomerate. Koza Altin is a member of the Koza Group and Koza Limited is its wholly-owned subsidiary.
Following a police raid of the Koza Group's headquarters in Ankara in September 2015, allegations were made by the Turkish authorities that the Koza Group was involved in the financing of terrorism. On 26 October 2015, an Ankara Criminal Peace Judge made an order under article 133(1) of the Turkish Criminal Procedure Code replacing the then existing boards of various companies within the Koza Group (including Koza Altin) with trustees who were required to manage those companies pending further investigations. An appeal from that decision was rejected on 12 November 2015 and a further appeal dated 18 November 2015 was lodged with the Constitutional Court but has not been dealt with. Pursuant to two further decisions of the Turkish Criminal Peace Court dated 13 January and 3 March 2016, the first to fifth defendants were appointed trustees of Koza Altin.
On 19 July 2016 a notice ("the section 303 notice") under section 303 of the Companies Act 2006 ("the 2006 Act") was purportedly served on behalf of Koza Altin requisitioning a general meeting of Koza Limited to pass resolutions replacing its directors (including Mr Ipek) with the first, second and third defendants. Koza Limited did not call such a meeting. Thus, following the statutory procedure, on 10 August 2016 a further notice under section 305 of the 2006 Act was purportedly served on behalf of Koza Altin, calling for a general meeting of Koza Limited for the purpose of passing those resolutions ("the section 305 notice").
Article 26 of Koza Limited's articles of association provides:
"26.1 Each shareholder shall exercise all voting rights and powers of control available to him in relation to the Company to procure that, save with A shareholder consent, the Company shall not effect any of the following matters:
(a) Permit or cause to be proposed any amendment to the Articles;
(b) Permit the appointment or removal of any person as a director of the Company; or
(c) …
26.2 As a separate obligation, severable from the obligations in clause 26.1, the Company agrees that, save with A Shareholder Consent, the Company shall not affect any of the matters referred to in subparagraphs (a) to (c) of Article 26.1 above."
Article 2.1 defines "A Shareholder Consent" as meaning "the prior, signed written consent of each A Shareholder". The two A shareholders were Mr Ipek and his brother, each of whom held one A share. It is the claimants' case that at least Mr Ipek did not and would not consent to the resolutions.
On 16 August 2016 the claimants commenced these proceedings seeking (i) declarations that the section 303 and section 305 notices were ineffective, (ii) an injunction preventing the defendants or any of them from holding any meeting of Koza Limited pursuant to those notices, (iii) an injunction to restrain the first five defendants or any of them from holding themselves out as having the authority to act for or to bind Koza Altin as a shareholder of Koza Limited and from causing Koza Altin to do anything or permit the doing of anything as a shareholder of Koza Limited. This relief was stated to be sought on two grounds. The first ground was that by article 26 of Koza Limited's articles of association, the resolutions to which the notices related could not be passed without the consent of Mr Ipek as an A shareholder and he did not consent. The second ground was that the court should not recognise any authority of the first five defendants to cause Koza Altin to serve the notices or any further notices or to take any other step as a shareholder of Koza Limited because such authority was granted (i) illegally under Turkish law, (ii) on an interim basis only, and (iii) in breach of natural justice and/or article 6 ECHR. Further, it would be contrary to public policy to recognise the grant of such authority. These two grounds for seeking the relief claimed have been referred to in these proceedings as "the English company law claim" and "the authority claim".
The basis of the authority claim, as it has been called, is expanded in the Particulars of Claim at paragraphs 5–30. Paragraph 5 of the pleading asserts that the English courts should not recognise any authority of the Trustees to cause Koza Altin to call any general meetings of the company or to do or permit the doing of anything else as a shareholder of the company. It...
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