Koza Ltd v Koza Altin Isletmeleri as
| Jurisdiction | England & Wales |
| Judge | Mr Justice Trower |
| Judgment Date | 31 March 2021 |
| Neutral Citation | [2021] EWHC 786 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: HC-2016-002407 |
| Date | 31 March 2021 |
[2021] EWHC 786 (Ch)
THE HONOURABLE Mr Justice Trower
Case No: HC-2016-002407
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Michael Bloch QC and Siward Atkins QC (instructed by Latham & Watkins (London) LLP) for the Claimants
Neil Kitchener QC and David Caplan (instructed by Mishcon de Reya LLP) for the Defendant
Hearing dates: 3 rd and 4 th March 2021
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
This version of the judgment has been redacted for publication. The unredacted version of the judgment is confidential to the parties and their legal advisers.
THE HONOURABLE Mr Justice Trower
Introduction
This judgment is concerned with applications by the defendant, Koza Altin Işletmeleri AS (“Koza Altin”) for injunctions to restrain the second claimant, Hamdi Akin Ipek (“Mr Ipek”) from causing the first claimant, Koza Ltd (“Koza”):
i) to use its money to continue to fund these proceedings;
ii) to use its money to continue to fund a new set of legal proceedings (the “New Authority Claim”) against Koza Altin; and
iii) to commit $9 million on what Koza Altin contends to be a speculative mining exploration project in Alaska (the “SAM project”).
Applications (i) and (iii) were issued on 7 December 2020 and application (ii) was issued on 15 February 2021. They are the latest in a long line of applications arising out of a dispute between Mr Ipek and Koza Altin relating to the control of Koza and the authority of those giving instructions on behalf of Koza Altin. Several of those earlier applications were also concerned both with the use to which Koza's assets can be put pending ultimate resolution of the dispute and with the true construction and effect of an order made by Asplin J on 21 December 2016 (the “Asplin order”).
The application in relation to the SAM project was argued in private. It raised matters in respect of which I was satisfied that the provisions of CPR 39.2(3)(c) were met. This judgment includes the matters that are confidential to the SAM project in a section that can be redacted for publication.
Koza and Koza Altin
Koza is an English company of which Mr Ipek is now the sole director. Its share capital consists of 60 million ordinary shares held by Koza Altin and two “A” shares held by Mr Ipek and his brother. Koza Altin is a Turkish company, the shares in which are held partly by Mr Ipek and members of his family and partly by members of the public. It is listed on the Istanbul stock exchange.
The “A” shares in Koza were created and allotted by resolution passed in September 2015. Koza's Articles of Association (the “Articles”) were also amended to introduce, amongst other matters, a new Article 26, pursuant to which the consent of the “A” shareholders is required for any amendment to the Articles, the appointment or removal of any person as a director of Koza, and the taking of any step to place Koza into administration, receivership or liquidation (save on the grounds of insolvency). Koza Altin disputes the validity of these resolutions. The effect of Article 26, if valid, is to entrench Mr Ipek as Koza's sole director, such that he cannot be removed without his own consent.
At the time that Article 26 was introduced, Koza and other entities in which Mr Ipek and his family were interested were embroiled in what Mr Ipek contends to be a politically motivated criminal investigation into the Koza group. In due course this resulted in the appointment by the Fifth Ankara Criminal Peace judge of a number of individuals as trustees of Koza Altin with power to control its affairs. In September 2016 the Trustees were replaced by the Savings Deposit Insurance Fund of Turkey, which has appointed the existing members of Koza Altin's board. For convenience, I will define those giving instructions on behalf of Koza Altin from time to time as “the Trustees”, although Mr Ipek says that their status to do so should not be recognised in England and throughout the hearing Mr Michael Bloch QC, who represented Koza and Mr Ipek, referred to them as the purported appointees.
Commencement of the proceedings and the orders made by Snowden J and Asplin J
This dispute gave rise to litigation in Luxembourg over the sum of £60 million which had originally emanated from Koza Altin in 2014 as payment of its capital contribution on the allotment of its 60 million ordinary shares. Koza had sought to have this sum transferred from a branch of Garanti Bank in Luxembourg to the English solicitors then acting for it, Morgan Lewis & Bockius UK LLP (“Morgan Lewis”), but those monies were frozen in Luxembourg between November 2015 and July 2016. On 19 July 2016, the Luxembourg court gave judgment for Koza and ordered Garanti Bank to release the funds for payment to Morgan Lewis.
Immediately after the Luxembourg court had given judgment in favour of Koza, Koza Altin, acting by the Trustees, served notice on the directors of Koza under s.303 of Companies Act 2006 (“CA 2006”) requisitioning a general meeting to consider resolutions for the removal and replacement of those directors. It also sought to direct the freezing of the money in Luxembourg pending the appointment of new directors.
The directors of Koza did not respond to the notices by calling the meeting sought by Koza Altin. There was, however, correspondence between Morgan Lewis and Koza Altin's solicitors, Mishcon de Reya LLP (“Mishcon”), from which two things in particular were apparent. The first was that Mr Ipek challenged the authority of the Trustees to act or give instructions on behalf of Koza Altin and the second was that there was some debate on the extent to which Koza was carrying on business. This was relevant to an argument by Koza Altin that Koza should not use any of the funds which had been unfrozen by order of the Luxembourg court pending resolution of the dispute.
On 10 August 2016, by which time it had become apparent that no such meeting would be called, Koza Altin served notice under s.305 of CA 2006 by which it itself convened a meeting to consider those resolutions. Mr Ipek, who was by then Koza's sole director, responded to the s.305 notice with an application for an injunction against the Trustees and Koza Altin to prevent the meeting from taking place. This application, which was issued in the names of Koza and Mr Ipek, came before Snowden J on 16 August 2016, who granted interim relief.
There were two bases on which the claim was advanced. The first was that the authority of the Trustees to act for Koza Altin as a shareholder of Koza should not be recognised in this jurisdiction. The way that this point was expressed in Koza's evidence in support of the present application is that:
“There is a dispute in these proceedings as to whether those purporting to act for Koza Altin have authority to do so. The claimants contend that they do not since they owe their appointments to a corrupt judgment of a “Judge” Süer, a so-called “Peace Criminal Judge”, who was appointed by the Erdogan regime as part of a widespread overthrow of the rule of law in Turkey. The claimants contend that the English Courts should not recognise such an appointment on public policy grounds.”
This came to be known as the Authority Issue and was then advanced by what Koza Altin called in its submissions the Old Authority Claim (a phrase that I shall adopt in this judgment for convenience to distinguish it from the New Authority Claim). Mr Bloch QC stressed that, so far as his clients were concerned, it was an important point from the outset and explained why they commenced the proceedings in the first place. They wanted to ensure that the question of who was able to represent Koza's 100% ordinary shareholder was resolved by the English court. Koza Altin's response was to contest the English court's jurisdiction to determine it. In due course it arose in a slightly different context when on 3 November 2016 Koza and Mr Ipek applied to strike out Koza Altin's statements of case on the basis that Mishcon did not have authority to represent it.
The second basis for the claim was that Article 26 meant that Koza Altin was not entitled to pass a resolution to remove a director of Koza without the consent of the “A” shareholders and no such consent had been obtained. This came to be known as the English Company Law Issue.
Koza Altin's response to the English Company Law Issue was to dispute the validity of both the resolution amending the Articles to introduce Article 26 and the board resolution pursuant to which the two “A” shares were issued. It counterclaimed seeking declarations that these resolutions were ineffective. It said that they were not made bona fide for the benefit of the company as a whole or were made for an improper purpose and that they were ineffective to prevent the resolutions set out in the statutory notices as an unlawful fetter on the powers conferred by statute.
The injunctive relief initially granted by Snowden J on 16 August was eventually included in the terms of an order dated 26 August 2016 (the “Snowden order”), which reflected correspondence between the parties' solicitors. This order included a set of injunctions and cross-undertakings designed to hold the ring pending an inter partes...
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