Koza Ltd v Koza Altin Isletmeleri as

JurisdictionEngland & Wales
JudgeLord Justice Moylan,Lord Justice Popplewell,Lady Justice Asplin
Judgment Date31 July 2020
Neutral Citation[2020] EWCA Civ 1018
Date31 July 2020
Docket NumberCase No: A3/2020/0647
Year2020
CourtCourt of Appeal (Civil Division)
Between:
(1) Koza Limited
(2) Hamdi Akin Ipek
Claimants/Appellants
and
Koza Altin Isletmeleri AS
Defendant/Respondent

[2020] EWCA Civ 1018

Before:

Lord Justice Moylan

Lady Justice Asplin

and

Lord Justice Popplewell

Case No: A3/2020/0647

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS

OF ENGLAND AND WALES

BUSINESS LIST (ChD)

MR JEREMY COUSINS QC

[2020] EWHC 654 (Ch)

Royal Courts of Justice,

Strand, London, WC2A 2LL

Vernon Flynn QC, Siward Atkins QC and Andrew Scott (instructed by Latham & Watkins (London) LLP) for the Claimants/Appellants

Neil Kitchener QC and David Caplan (instructed by Mishcon de Reya LLP) for the Defendant/Respondent

Hearing dates: 30 June, 1 July 2020

Approved Judgment

Lord Justice Popplewell

Introduction

1

This is an appeal from the grant of an injunction by Mr Jeremy Cousins QC, sitting as a Deputy Judge in the Chancery Division, restraining the appellants, Koza Ltd and Mr Ipek, from using £3 million of assets belonging to Koza Ltd to fund an arbitration claim brought under the auspices of The International Centre for the Settlement of Investment Disputes (“ICSID”). The ICSID arbitration claim is brought against the Republic of Turkey by Ipek Investments Ltd (“IIL”), said by the appellants to be the holding company for the corporate group to which Koza Ltd belongs (“the Koza Group”). The Koza Group is a Turkish based mining and media conglomerate owned by Mr Ipek and members of his family.

2

The injunction follows an undertaking given by Koza Ltd earlier in the proceedings not to use its assets otherwise than in the ordinary and proper course of business. There is a dispute between the parties as to whether the funding falls within that exception, which has already been considered by this Court ( [2019] EWCA Civ 891). This Court decided that the issue could not be definitively resolved either way on the basis of the written evidence in that application. It was common ground that it was equally incapable of definitive resolution on the injunction application before the Judge. The Judge granted the injunction on the grounds that he had a high degree of assurance that the funding would be a breach of the undertaking and the balance of least irremediable prejudice clearly favoured it. The application for permission to appeal against his decision was adjourned to the full Court for a rolled up hearing of the application and, if granted, the appeal itself.

Background

3

The proceedings involve a dispute over control of Koza Ltd. Koza Ltd is an English company incorporated on 24 March 2014 and capitalised by the respondent, Koza Altin, with £60m to carry out mining operations outside Turkey including ventures with other established international mining companies. Mr Ipek was one of its two directors and is now its sole director. Koza Altin is its immediate parent company owning all the equity shareholding.

4

Koza Altin is a Turkish company which is part publicly owned and part owned directly and indirectly by Mr Ipek and members of his family. It is not, however, currently controlled by Mr Ipek or his family. Mr Ipek says that the Turkish Government has illegally expropriated the Koza Group's assets for political reasons and has pursued a concerted campaign of harassment and oppression against the group and its shareholders and employees, including pursuing criminal proceedings against Mr Ipek and his family on the basis of allegations which Mr Ipek says are spurious. The Republic of Turkey sought the extradition of Mr Ipek from England to Turkey, but such extradition was refused on the grounds that the criminal proceedings against him in Turkey were politically motivated.

5

In proceedings in Turkey relating to the criminal investigation into the Koza Group, on 26 October 2015 the Fifth Ankara Criminal Peace judge appointed certain individuals as trustees of Koza Altin and 21 other Turkish companies in the group, pursuant to article 133 of the Turkish Criminal Procedure Code, with power to control the affairs of those companies in place of the existing management. Pursuant to further decisions of that judge dated 13 January and 3 March 2016, five individuals were appointed as the trustees of Koza Altin. In September 2016 the trustees were replaced by the Tasarruf Mevduati Sigorta Fonu, the Savings Deposit Insurance Fund of Turkey (“the SDIF”) as the single trustee of Koza Altin. The SDIF has appointed various individuals to the board of Koza Altin.

6

In order to defend his control of Koza Ltd, in September 2015 Mr Ipek caused a number of changes to be made to Koza Ltd's constitution and share structure. Resolutions were passed to create a new class of “A” shares and to amend Koza Ltd's articles of association to introduce a new article 26 which purported to preclude any further changes to the articles of association or any change of directors save with the prior written consent of the holders of the “A” shares. Two “A” shares were issued, one to Mr Ipek and one to his brother.

7

The validity and effect of these changes is in issue in these proceedings. The appellants contend that they are valid and lawful. Koza Altin contends that they are invalid and unlawful attempts to entrench Mr Ipek and his associates in control of Koza Ltd.

8

On 19 July 2016, the trustees of Koza Altin caused a notice to be served on the directors of Koza Ltd under section 303 of the Companies Act 2006, requiring them to call a general meeting to consider resolutions for their removal and replacement with three of the trustees. Mr Ipek did not call such a meeting, so on 10 August 2016 Koza Altin served a notice pursuant to section 305 of the 2006 Act to convene a meeting on 17 August 2016 to consider those resolutions. The service of this notice prompted Mr Ipek and Koza Ltd to make an urgent without notice application on 16 August 2016 seeking an injunction against the trustees and Koza Altin to prevent the meeting taking place and, so far as required, orders for service out of the jurisdiction and for alternative service.

9

Injunctive relief as set out in the application was sought on two bases. It was contended that (i) the notices of 19 July and 10 August 2016 were void under section 303(5)(a) of the 2006 Act because at least one of the holders of the “A” shares (Mr Ipek) did not consent to the proposed resolutions and so, if passed, they would be ineffective as being passed in breach of article 26 (“the English company law claim”); and (ii) the notices were void on the basis that the English courts should not recognise the authority of the trustees to cause Koza Altin to do anything as a shareholder of Koza Ltd, because they were appointed on an interim basis only and in breach of Turkish law, the Convention for the Protection of Human Rights and Fundamental Freedoms and natural justice, so that it would be contrary to public policy for the English courts to recognise the appointment (“the authority claim”).

10

At the without notice hearing before Snowden J on 16 August 2016 the judge granted interim injunctive relief as sought by Mr Ipek and Koza Ltd and gave permission for alternative service at the offices of Mishcon de Reya LLP (“MdR”), the solicitors acting for Koza Altin and the trustees.

11

Mr Ipek and Koza Ltd issued their claim form on 17 August 2016 seeking a declaration that the notices were ineffective; an injunction to restrain Koza Altin and the trustees from holding any meeting pursuant to the notices and from taking any steps to remove the current board of Koza Ltd; a declaration that the English courts do not recognise any authority of the trustees to cause Koza Altin to call any general meetings of Koza Ltd or to do or permit the doing of anything else as a shareholder of Koza Ltd; and an injunction to restrain the trustees from holding themselves out as having any authority to act for or bind Koza Altin as a shareholder of Koza Ltd and from causing Koza Altin to do anything or permit the doing of anything as a shareholder of Koza Ltd.

12

Koza Altin and the trustees filed an acknowledgement of service indicating their intention to contest jurisdiction and then issued such an application. At the same time, Koza Altin filed a defence and counterclaim to the English company law claim. The counterclaim impugned the validity and effectiveness of the resolution amending the articles to introduce article 26, and the validity and effectiveness of the board resolution of Koza Ltd pursuant to which the two “A” shares were issued on the grounds that they were not made bona fide for the benefit of the company as a whole and/or were made for an improper purpose; and/or that they were ineffective to prevent the resolutions set out in the s. 303 and s. 305 notices as an unlawful fetter on powers conferred by statute, including the power under s.168(1) of the Act to remove a director by ordinary resolution. The relief sought comprises declarations that the resolution amending the articles, article 26 itself, and the resolution to allot and purported allotment of the “A” shares are all invalid and/or ineffective and/or unenforceable.

13

The application by Koza Altin and the trustees to challenge jurisdiction was heard by Asplin J, as she then was, in December 2016. Her decision upholding jurisdiction was appealed to the Court of Appeal and then to the Supreme Court, who held on 29 July 2019 that there was no jurisdiction in respect of the authority claim. The claim is therefore now proceeding against Koza Altin as the sole defendant and the action is...

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